Oral Answers to Questions

TREASURY

Northern Rock

Bob Spink: What assessment he has made of the effect the run on Northern Rock has had on the attractiveness of the UK to financial institutions; and if he will make a statement.

Nadine Dorries: What assessment he has made of the effect the run on Northern Rock has had on the attractiveness of the UK to financial institutions; and if he will make a statement.

Alistair Darling: With permission, I shall answer Questions 1 and 2 together. The United Kingdom remains in a fundamentally strong position. London remains the leader in international financial markets, and we are determined to keep it that way.

Bob Spink: Thousands of my constituents work in the City of London. They go up every day on the train. What reassurance can the Chancellor give them that his delay and dithering are not harming their job prospects?

Alistair Darling: I appreciate that London is important—not just important to the hon. Gentleman's constituency and the wider south-east of England, but crucially important to the whole United Kingdom.
	We should recognise two things. First, what happened to Northern Rock arose fundamentally because of a mistake made by its management, who had a business plan that simply could not operate when the money markets dried up for them. In relation to London generally, it is recognised throughout the world that our regulatory regime is sound and that our approach is right. London is a recognised world centre for much of the world's financial trade, and I am determined that it should remain so in the future.

Several hon. Members: rose —

Mr. Speaker: Order. I am due to call the hon. Member for Mid-Bedfordshire (Mrs. Dorries). Can the Chancellor assure me that it was made clear that her question would be linked to Question 1?

Alistair Darling: Yes, Mr. Speaker, and I understood that it was linked.

Barry Sheerman: Is my right hon. Friend aware that many people in my constituency, in the north of England, and indeed in the City believe that the Government's handling of the Northern Rock crisis has been first-rate? Jobs have been preserved, the bank is being preserved, and we have an opportunity to save the reputation of the financial services on behalf of our country and the economy. Is my right hon. Friend aware that some of us are sick to death of Conservative Members who could not in any way run the proverbial chip shop—

Mr. Speaker: Order.

Alistair Darling: I probably do agree with much of what my hon. Friend has said.
	As I told the House in my statement earlier this week, we are in a difficult position to which, in an ideal world, it would have been good to find a purely commercial solution. Our problem, recognised by at least some Conservative Members, is that the very market conditions that precipitated the problems for Northern Rock are continuing, and it will be obvious to those who look at what is currently happening in the financial markets that those conditions are difficult.
	I believe that what I set out on Monday was the right thing to do. I want to ensure not only that we protect the interests of taxpayers and depositors, but—importantly—that we maintain financial stability. As I said to the hon. Member for Castle Point (Bob Spink) a few moments ago, we should all bear it in mind that in the City of London we have one of the finest assets in the world.

Mark Field: In view of the Bank of England's role in the Northern Rock saga, can the Chancellor give any reason why he feels that we should not appoint Mervyn King to a second term as Governor?

Alistair Darling: I have made it clear that the matter of appointments will be dealt with in due course. As I said on Monday, I intend next week to publish wide-ranging proposals to strengthen our regulatory and supervisory regime.

John McFall: I know from visits by the Treasury Committee to Washington, Frankfurt and Brussels that the pre-eminence of London as a financial centre is not in doubt, but we need to do two things: reform the tripartite arrangement and address the international dimension. That is the case whether we are talking about liquidity tests, which many countries have not undertaken, or rating agencies. Those two issues are paramount, and I hope that when the Chancellor receives the Treasury Committee's report on Northern Rock he will not only include it in the consultation exercise, but take our comments on both issues seriously.

Alistair Darling: I hope very much that we can do that. I understand that the Committee's report will be published fairly quickly, and once we have read its conclusions I shall accommodate as many as possible.
	My right hon. Friend's other point is equally important. This is very much an international problem. Some of the problems that are affecting banks are affecting them all over the world. We need to look at early-warning systems, and also at the position of the credit rating agencies. As I have said before, I have always regarded them as simply a source of advice for companies, not a substitute for their judgment. We also need to look at the recommendations for the Financial Stability Forum, which we will discuss with Finance Ministers when the G7 meet in Tokyo in a couple of weeks.
	The last thing I would say is that although I can see that it is very tempting from the Opposition's point of view to run down the City, those working in the City and people in the country as a whole deeply resent it when the Conservatives attempt to do that. Actually, the City is very important to us.

Mark Hoban: The Chancellor blames the situation on international turbulence, but it is only in Britain that the threat of nationalisation hangs over a bank, it is only in Britain that there is a run on a bank, and it is only in Britain that £55 billion of taxpayers' money is at risk. Is that not why the Chancellor's own advisers, Goldman Sachs, said:
	"The Northern Rock factor has badly dented the UK's reputation for being the world's pre-eminent financial centre"?
	 [Interruption.] His own advisers said that. By damaging that reputation, has he not put at risk jobs not only in the City of London but across the UK, as well as tax revenues and economic growth, and all because of his dithering and delay in dealing with this crisis?

Alistair Darling: Mr. O'Neill is a widely respected commentator, but his view on that particular point is not universally shared. Indeed, many people who work in the City and in London recognise London's importance to the UK. I said a few moments ago that I thought the Conservatives' comments were unhelpful, and the hon. Gentleman has duly obliged by emphasising that point.
	On the hon. Gentleman's other points, if he cares to look back over events of the past few months he will see that banks throughout the world have been affected by the current problem. That demonstrates that although there are huge advantages in globalisation, huge challenges can also arise, as we can see only this morning.

George Mudie: Olivant and Virgin were given preferred bidder status on the basis of a main feature of their bid being repayment of £10 to £15 billion-worth of debt. Now that that has disappeared, if another private sector bid comes in and, not having had months of scrutiny of Northern Rock's books, expresses a wish for the 4 February deadline to be shifted slightly, will the Chancellor look positively on that reasonable request?

Alistair Darling: First, when Olivant and Virgin put in their indicative bids, that was conditional on their being able to raise commercial sources of finance. That has proved not to be possible for the reasons I set out on Monday. I also said on Monday that if any other institution expressed an interest in participating in investing in Northern Rock, we would look at that. I said I wanted proposals by 4 February, and I do not see any merit in letting this process drag on indefinitely. Regardless of where they start from on this issue, I think most Members take the view that we need to bring matters to a head, not least because the state aid approvals will expire in March. If someone comes along on 3 February, of course we will listen to them, and inevitably in such matters there will have to be negotiation. So far, only Olivant, Virgin and the board have expressed an interest. We will be sensible, but I do not want the process to drag on and on.

Vincent Cable: Further to that last intervention, is not the risk of a rapid private sale that the Government will either be trampled by an Olivant or shafted by a Virgin? In order to reduce the risks to the taxpayer, will the Chancellor assure us that the security that will be offered against the Government bonds will not include any of the £8 billion dodgy, unsecured loans, or the even dodgier Together mortgages, and that the individuals within the bidding consortiums will each be required to put up at least 15 per cent. of the equity, as specified in Financial Services Authority rules?

Alistair Darling: That is an interesting piece of analysis, and I shall study the hon. Gentleman's remarks carefully—particularly the first part of his contribution. I have set out the principles that underpin our approach to any possible solution. As I said on Monday, we should receive proposals shortly, and thereafter we shall consider them. As I also said in the House on Monday, I very much hope we can reach a solution. A period of temporary ownership of Northern Rock remains a possibility, but as I said to the hon. Gentleman on Monday, many of the issues he raises now in relation to my proposals would also be relevant in relation to a temporary period of public ownership.

Jim Cousins: May I ask my right hon. Friend the Chancellor to avoid a situation in which either Northern Rock goes bust—that would be incredibly damaging to Britain's reputation—or he ends up as a sort of neo-Mr. Putin, operating Northern Rock as a kind of Gazprom of the north?

Alistair Darling: I had better be careful there for a number of reasons. Suffice it to say, as I have said on many occasions, both before the Treasury Committee, of which my hon. Friend is a member, and on the Floor of the House, that what I set out on Monday offers a constructive way forward for Northern Rock and that I hope that we can find a solution, but if that does not happen, public ownership remains an option. I would much prefer to find a solution whereby we can get private sector investment in it, because I think that in the long term that would be the better option for the bank, its employees and the north-east.

Value Added Tax

Jim Cunningham: How many companies Her Majesty's Revenue and Customs has taken action against for failure to pay value added tax correctly in the last 12 months.

Jane Kennedy: There is a range of figures on this, and it is difficult to give an exact answer, because a range of actions can be taken. HMRC aims to help business pay the right tax due at the right time, and it tailors its response to the circumstances when that does not happen. Businesses in temporary difficulties can agree time-to-pay arrangements, but those who underpay may face sanctions.

Jim Cunningham: I thank my right hon. Friend for that answer. Will she say what assistance she is giving small business to help with the VAT burden?

Jane Kennedy: My hon. Friend raises a very important point. To assist VAT administration for small businesses, HMRC has introduced a variety of special schemes, which may be used individually or in combination. Each of the VAT schemes addresses a slightly different aspect of the tax, and will have different benefits and costs depending on the individual business. The schemes are specifically designed to assist small businesses in their dealings with HMRC.

Henry Bellingham: How long does it take a new company to register for VAT now?

Jane Kennedy: As the hon. Gentleman and the House know, there have been difficulties with registering new businesses for VAT, but HMRC has put a tremendous effort in to address the problems that arose. He knows that HMRC has targets to achieve. It is on course to hit those targets by the end of January, which is a week away, and its performance has improved enormously, as businesses seeking to register will discover.

Departmental Performance

Michael Fabricant: If he will make a statement on the findings of the Cabinet Office report on the performance of his Department and Her Majesty's Revenue and Customs.

Angela Eagle: The findings of the reviews of Her Majesty's Treasury and HMRC were accepted in full by the Treasury's permanent secretary and by HMRC's acting chairman. Both Departments have responded in detail to the findings of the reviews in their respective reports, which were published by the Cabinet Office on 17 December 2007.

Michael Fabricant: I thank the Minister for her enthusiastic answer. Does she recall that in 1998 the then Chancellor of the Exchequer, now our Prime Minister, said:
	Money will be released only if Departments keep to their plans."—[ Official Report, 14 July 1998; Vol. 316, c. 188.]?
	He said that in respect of public service agreements. Is she aware that the HMRC capability review says that only three out of 10 targets are likely to be reached? If that is the case, how much money will now be withheld from HMRC?

Angela Eagle: The capability reviews are a new, honest, robust and open way of focusing on delivery. They are published, as are the responses to them, and I am glad that the hon. Gentleman is so interested in them. We want this public focus on capability so that we can ensure that the civil service can deliver much more effective and efficient government to make the best use of the money that this House allocates.

Rob Marris: Tax credits introduced by this Government have helped millions of families around the country, but the administration of them has, on occasions, been poor. Tax credits involve a Kafkaesque situation, because if one gets on to them, one cannot voluntarily withdraw from them. I understand that the only way to get out of tax credits is by dying or by having a substantial increase in one's income. One cannot simply say, as one of my constituents tried to do, "I want no more to do with this." Will my hon. Friend please examine the issue?

Angela Eagle: My hon. Friend knows about Kafka and I can tell him that HMRC has found a way out of the Kafkaesque situation as part of its transformation project. His constituent should therefore be able to withdraw from tax credits if that is what he or she wishes to do.

Mark Pritchard: How can cutting 600 HMRC jobs through Capgemini in Shropshire help the performance of the Minister's Department?

Angela Eagle: The capability review had no criticism of the changes in staffing that have gone on in HMRC. On the contrary, it praised HMRC for delivering in core business and making efficiency savings at the same time. I am surprised that the hon. Gentleman seems to think that the Government should not be working to improve the productivity of public service.

David Taylor: In its report on HMRC data security, the Cabinet Office urged that in the longer term electronic data transfer should be expanded significantly to reduce the use of removable media. Will the Minister tell us what preparations have been made for that? What training might be provided for HMRC staff in the light of the fact that ICT experience in the Treasury and its broader agencies has been reduced over many years by the continued adherence to outsourcing computer products?

Angela Eagle: My hon. Friend should be assured that the interim Poynter review has already identified some of those issues. The management of HMRC are working to establish data security while the review is ongoing. We await the final findings, which will deal with those issues in more detail. I can assure my hon. Friend that I shall take on board all his points, which are fair, and that we will make changes to structures and systems in order to ensure that the highest standards can be guaranteed in future.

Philip Hammond: The capability review of HM Treasury at the end of the Prime Minister's decade in control of it noted, among other things, that there is
	"a pressing need for greater inclusiveness and humility in its dealings with others."
	Who does the Minister think is responsible for that deficiency?

Angela Eagle: We have seen an extraordinary period of success with a stable economy, strong growth, increased employment, record investment in public services and one of the strongest economic records in the G7. In 2007 we had the highest growth rate in the G7. We are determined to maintain that economic stability and success.

Bingo

Malcolm Moss: What recent discussions he has had on the taxation regime for bingo clubs.

Angela Eagle: Treasury Ministers and officials have met a range of stakeholders, including representatives of the bingo industry, to discuss gambling taxation issues.

Malcolm Moss: Bingo is the only mainstream gambling product that is doubly taxed, by VAT as well as gross profits tax. That level of taxation has been a primary cause in the closure of 81 clubs and the identification of a further 108 clubs as at risk. Since each club closure costs the Treasury some £700,000 in lost tax revenues, does not the Minister see the sense in removing this unfair imposition of VAT on bingo? That would be tax revenue-neutral, would prevent further club closures and would secure this popular leisure activity for thousands of people.

Angela Eagle: Obviously, we keep all taxes under review and decisions about gambling taxes are made at the Budget. It is not at all clear that removing VAT on participation fees would be enough to make some of the marginal clubs viable. I must correct the hon. Gentleman, as bingo is not the only gambling sector to face both duty and VAT. Gaming machines are liable to VAT and amusement machine licence duty. I must also tell the hon. Gentleman that in 2003, bingo saw a big reduction in its effective tax rate from 35 per cent. to a rate that ranges between 20 and 25 per cent. That is in line with all the other tax impositions on other forms of gambling.

Paddy Tipping: Last autumn, I had the very great privilege of calling the numbers at the Byron bingo and social club in Hucknall. Will the Minister listen to the concerns of staff and customers, at the Byron and across the sector, about the effects that the smoking ban and the taxation system have had on the industry's future? Will she look closely at bringing forward proposals in the Budget to help secure that future?

Angela Eagle: I assure my hon. Friend that we keep all such matters under close review. The Government have done good things for bingo, not least among them the fact that we lowered the higher rate of tax in 2003. In addition, we have removed the 24-hour rule and the membership requirements, and we have allowed maximum stakes on prize gaming machines to be doubled. We have also allowed rollovers and created the potential for much larger prizes. My hon. Friend mentioned the smoking ban, so he has not fallen into the trap of thinking that all of bingo's problems are the result of VAT rates. They are not.

Stewart Hosie: In a recent answer to me on this subject, the Minister said:
	"The Government consider all relevant factors when establishing and maintaining fair regimes for the gambling taxes and keep all taxes under review."—[ Official Report, 14 January 2008; Vol. 470, c. 907W.]
	Bingo clubs provide important social benefits in many communities. What relevant factors did the Treasury consider that led it to conclude that bingo clubs should be taxed more than licensed betting offices and internet gambling?

Angela Eagle: The issues with internet gambling and offshoring are obvious, but I must correct the hon. Gentleman: the changes made in 2003 knocked 10 per cent. off the effective tax rate for bingo and brought it into line with other forms of gambling. Bingo is not discriminated against.

Climate Change (Economic Impact)

Jim Devine: What recent representations he has received on the economic impact of climate change.

Andy Burnham: The Stern review assessed a wide range of evidence on the impact of climate change and its economic costs. It concluded that the benefits of strong and early action far outweigh the economic costs of not acting. The intergovernmental panel on climate change has also assessed the economics of taking action, and come to similar overall conclusions.

Jim Devine: I am grateful to the Chief Secretary for that answer. As he knows, the Stern report is iconic—a word that I understand could be attributed to my right hon. Friend! The report states that the Government should spend 1 per cent. of gross national product to mitigate the effects of climate change. Have we met that target? When can we hope to do so?

Andy Burnham: I am not sure that I have done anything to deserve such lavish praise from my hon. Friend, but he is right that the Stern report on the economics of climate change has changed the debate, in this country and around the world. It made it clear that the people who could suffer most from a failure to tackle climate change, or from a lack of ambition in our approach to it, are those living in the developing countries. They are the most vulnerable, and he is right to say that Stern said that the cost of not acting would be large. That is why the Government took various measures in the recent spending review to ensure that we are prepared to face the challenges posed by climate change.

Tony Baldry: Should not the committee on climate change be set up now, as a matter of urgency? It is not due to report on the 2050 target or the inclusion of aviation in that target until late 2009, and the fact that it has not been set up yet gives an impression of a lack of a sense of urgency on the Government's part. Setting up the committee as soon as possible would send out a very good signal that the Government are intent on taking this matter forward as fast as possible.

Andy Burnham: I hear what the hon. Gentleman says, but I assure him that every step is being taken to set up the committee as soon as possible. Every action that the Government are taking makes it clear that we recognise the urgency of the situation, and we have already asked that the committee consider the new scientific evidence being produced to see whether higher targets should be set—although the target of reducing carbon emissions by 60 per cent. by 2050 remains very challenging. The Bill currently being considered in another place is pioneering and groundbreaking, and it sends a very clear signal to the rest of the world about the level of this country's ambition.

Brian H Donohoe: What assessment has my right hon. Friend made of the effect of the climate change levy on industries that are high users of energy, such as the paper-mill in my constituency?

Andy Burnham: The evidence that the Treasury has collected shows that the climate change levy has reduced harmful emissions overall and has produced revenue that is useful in the fight against climate change. I recall that the levy was introduced in the face of opposition from Conservative Members. It was a far-sighted decision taken back in the early days of this Government. That shows that the Government have always had climate change at the heart of their agenda, unlike others who came to the issue more recently.

Nicholas Winterton: With the rapid, dramatic rise in the cost of fuel, energy and food, and in council tax, will the Government be extremely careful about imposing any more additional costs on either the individual or industry? In respect of industry, to follow up on the last question, it would be easy to make British manufacturing industry far less competitive, but we would be a fool to do so, given that so much of climate change is caused by other places and not this country, and given that there remains considerable scientific debate about the impact of climate change.

Andy Burnham: The hon. Gentleman raises an important point. There is a tension between legitimate objectives, and there is a balance to be struck, but I hope to assure him that the Government seek to strike that balance in all their actions. However, he must recognise that the Stern review identified that there are economic costs to the country and its citizens of not taking action at the appropriate level. If we do not take action on climate change, the cost of food could rise well into the future. We need to consider both the short term and the long term. He rightly raised the issue of fuel bills; we, as a Government, must ensure that we take further steps to help people who are struggling with energy costs, particularly those who face the threat of fuel poverty. He will know that, to meet that objective, we have committed ourselves to the winter fuel payment for the duration of this Parliament.

Andy Reed: The Stern report rightly recognises that it is people in the poorest countries who will be affected most and first. In the Minister's discussions, both at UK and European level and with China and India, will he ensure that any financial measures that are taken to impact on climate change in the UK are reciprocated in places across the globe? Given the growth in the economies of China and India, they will increasingly be at the forefront of having to tackle climate change. Will he ensure that any discussions are international, not just domestic?

Andy Burnham: My hon. Friend is absolutely right. I think the phrase that Stern uses is that hundreds of millions of people could suffer if we do not take appropriate action. It is true to say that those who would suffer most are those around the world who have perhaps contributed least to climate change. He is right to say that international action is the key. We should take some encouragement from the fact that the European Commission's package, published this week, draws heavily on the Stern review. It shows that climate change is territory on which there needs to be constructive engagement at the heart of Europe; that is particularly relevant this week, as we have been debating those matters. We want to meet the challenges of this century, whereas others seek constantly to fight the battles of the last century, and constantly bang on about Europe.

Capital Gains Tax

Stewart Jackson: What assessment he has made of the impact of the capital gains tax proposals announced in the 2007 pre-Budget report on the decision-making process of small businesses.

Alistair Darling: Mr. Speaker, with your permission I propose to make a statement on the subject of capital gains tax immediately after Question Time.

Stewart Jackson: Would the Chancellor like to take this opportunity to apologise to the House for his half-baked, panicked proposals, which were driven by political considerations, as well as for the damage that he has done to small businesses' planning and confidence, and for the failure properly to consult the business community? Perhaps after that he will say where he will get the money to fund his belated U-turn, which is to be announced later this morning.

Alistair Darling: I shall come to my proposals fairly shortly. The fact that we have more than 760,000 more small and medium-sized enterprises in the past 10 years is testament to the fact that this country is a good place for small businesses to carry on their operations.

EU (Co-ordinated Action)

Patricia Hewitt: What discussions he has had with his European counterparts on co-ordinating action across the EU in response to turbulence in the US sub-prime market.

Alistair Darling: I met my French, German and Italian counterparts, along with the European Commissioner, in Paris last week to discuss current market conditions. In addition to that, the Prime Minister will meet his counterparts in London next week.

Patricia Hewitt: In view of this morning's announcement of very substantial losses by Société Générale, will my right hon. Friend say a little more about what practical proposals he and the Prime Minister will be putting forward to ensure that financial regulators, central banks and Governments work together right across the European Union to improve both transparency and stability in Europe's banking sector?

Alistair Darling: I am aware of the reports from Société Générale in Paris. The Financial Services Authority is looking at the situation. As I understand it, that concerns something that happened in the bank's operations in Paris, and I further understand that the French Treasury will make a statement later today. On my right hon. Friend's more general point, it is important to recognise that many of the problems that we have to deal with transcend national boundaries, particularly in relation to the role of the International Monetary Fund and the forum for financial stability and what they can do to get better early warning, and the need to achieve agreement on how banks deal with off balance sheet structured investment vehicles in relation to the credit rating agencies. These are all areas where we must take international action.
	We discussed some of these matters in Paris last week, and I very much hope that as we move towards conclusions, we can get the international community to move far faster than it usually does. It took 10 years to get Basel 2 agreed to, and we do not have 10 years to sort out the present problems. We need a combination of actions on the part of individual institutions to report the full extent of their exposure as quickly as possible, so that we can end some of the present uncertainty. That would help to restore stability. In addition, it will be necessary for action to be taken not just domestically, as I shall outline next week, but internationally. Above all, as I think my right hon. Friend would agree, whatever we do must be proportionate. We must avoid the temptation to have a rule and regulation for every possible eventuality, as the American Government did after the Enron difficulties earlier in this decade, which proved to cause as many difficulties as they thought they were solving.

Oliver Heald: What are the implications for major infrastructure projects such as the expansion of Stansted airport, where a Spanish company which is already heavily borrowed is the lead on that project? What implications will the crisis have for such a project? Are other projects that the Government consider to be in the national interest—I do not happen to think that that is one of them—threatened by the crisis?

Alistair Darling: I wondered whether the hon. Gentleman was changing his line on Stansted. No doubt he is anxious to make that point for his constituents, if not others. It is for BAA, which owns Stansted, to decide whether the investment that it thinks is necessary can come forward. I very much hope that it can. Yes, we have an immediate problem in relation to credit and what is happening in the markets, but we should ask ourselves all the time what we will need 10, 20 or 30 years ahead. When it comes to aviation, as I have said many times, ever since I published the aviation White Paper in 2003, the problem that we have in this country is that on successive occasions when we should have been looking to the long term, short-term decisions were taken that prejudiced the development of transport infrastructure, in particular. That is why it is important that people ask themselves what Stansted will need in 10 or 20 years. I think BAA will take the long-term view, which is extremely important.

Peter Tapsell: Has the Chancellor noted that there seems to be almost universal agreement in the United States that the threat of recession following the sub-prime mortgage and credit crunch crisis can best be warded off by a combination of lower interest rates and fiscal stimulus? Does he think that the response of the European Union and of Britain should be similar, and if not, why not?

Alistair Darling: Mainly because the situation in the United States economy is rather different from the situation in our economy and in other major economies in the EU. As the hon. Gentleman rightly recognised, the big problem that the Americans have is that following the collapse of the US sub-prime market, the problem has gone on to affect the US housing market more widely. In America, the basic problem is that the supply of housing far exceeds the demand. In this country, we have the opposite problem: demand for housing exceeds supply, as we well know. What may be appropriate for the US economy is not always necessarily appropriate for other economies. As I have said on a number of occasions, because we have low unemployment, historically low inflation and low interest and mortgage rates, the Monetary Policy Committee has room for manoeuvre—as the Governor said in his speech in Bristol, I think of Tuesday evening—that was not available 15 years ago, when the previous Government got into such terrible problems. We will continue to do what is right for the UK economy, and at the heart of that is ensuring that we have a strong, stable economy and that we take the right decisions for the long term. If we do that, we can get through these problems, just as we have dealt with problems in the past.

Data Protection

Hugo Swire: On how many occasions in his Department and its agencies confidential data has been downloaded on to CDs without encryption in the last 12 months; and if he will make a statement.

Jane Kennedy: There is no central record, as across government the protective marking "Confidential" has a broad specific meaning, and is of a lower order than other security classifications. But it is a very good question, and one of the reasons why the Prime Minister invited Professor Walport to undertake a review of security arrangements across government.

Hugo Swire: We welcome the ruling by the Cabinet Secretary, Sir Gus O'Donnell, about not taking laptops or computer drives out of offices, but there are many people out there who still believe that the Government have been at best casual and at worst highly irresponsible, and cannot understand why the natural default position is not to encrypt personal data. The Minister has once again repeated her party's position, hiding behind the report from Kieran Poynter. Does she simply not know the details at this stage? Can she guarantee that the Poynter report will not be slipped out on the eve of a parliamentary recess, and will be accompanied by an oral statement in the House?

Jane Kennedy: I am afraid that the hon. Gentleman prepared his supplementary before he heard my answer to his first question, because I did not refer to Poynter at all. But he brings me to an important point, which is that Her Majesty's Revenue and Customs instituted new controls. We accept that what happened last November was a grave mistake and that is being corrected. Immediately, HMRC put in controls that required that all customer data transferred by CD be encrypted. I would expect that in his full report, Mr. Poynter will consider how internal processes and culture at HMRC can be strengthened to achieve appropriate data security in the future. The hon. Gentleman can be assured that the House will have the fullest opportunity to comment when Mr. Poynter is ready to report.

David Gauke: I congratulate the Financial Secretary. This is about the first answer to a question relating to data that did not refer to the Poynter report, because the Government have consistently refused to answer perfectly reasonable questions about the missing data, about how many discs have been lost by HMRC, or even HMRC's tracking procedures with private courier firms, by batting them away, saying that Poynter will report in due course. Given that Poynter will not report for some months, is it not about time that the Government abandoned their brazen attempts to kick the issue into the long grass, treated Parliament with a bit more respect and started answering some questions on this matter?

Jane Kennedy: I do not accept the premise of what the hon. Gentleman says. I take extremely seriously the changes that need to be made within HMRC and that are being made. Kieran Poynter, in his interim report, referred to the fact that many of his immediate recommendations had already been acted upon by HMRC in its immediate response to the circumstances. So the Government and HMRC have given a serious and considered response to the circumstance that HMRC found itself in last November. The matter is being taken extremely seriously indeed, and the House can be assured that Poynter's final report will be presented to the House, I am sure by an oral statement.

Structural Budget Deficit

Robert Syms: What estimate he has made of the UK's structural budget deficit in comparison with other western European economies.

Andy Burnham: Cyclically adjusted net borrowing in the UK has averaged 1 per cent. of GDP over the economic cycle that began in 1997. Over the same period, the structural deficit has averaged 2.1 per cent. in the euro area, 3 per cent. in France, 2.3 per cent. in Germany and 2.8 per cent. in Italy.

Robert Syms: Is it not the case that our structural deficit is now higher than that of many countries in the euro zone, and is it not true that the Government have squandered tax revenue in years of relatively high growth and now have no choice but to raise taxation to meet the golden rule?

Andy Burnham: As the figures that I read out indicated, that is not the case. Net debt in this country, at 37.2 per cent. of GDP, is lower than that of France, Germany, the US and all the G7 except Canada. That is the result of a strong fiscal framework and strict fiscal rules that the Government have applied in the past 10 years. We will continue to borrow only to invest, enabling the renewal of our critical national infrastructure—something that the hon. Gentleman's Government signally failed to do.

Topical Questions

Ann Winterton: If he will make a statement on his departmental responsibilities.

Alistair Darling: As I said earlier this month, the core purpose of the Treasury is to ensure the stability of the economy, promote growth and manage the public services and finances.

Ann Winterton: When the fuel escalator was introduced, the oil price was low—the exact opposite of what it is now. The escalator is adding huge, increased costs to British business and industry, thereby endangering their competitiveness while fuelling the flames of inflation. Will the Chancellor consider suspending the escalator?

Alistair Darling: I keep all taxes under review. Generally, our economy has remained very competitive. British industry has done very well; indeed, as yesterday's figures showing continuing growth of gross domestic product confirm, the transport sector remains healthy. However, as my predecessor said, we need to ensure that we maintain the appropriate level of taxation on fuel.
	It is difficult to make like-for-like comparisons with other countries around Europe, but I think that the level of taxation at the moment is right. We will do everything that we can to help resolve the difficulties that we have with high oil prices. It is particularly important that oil producers recognise that they have an interest in making sure that there are adequate supplies of oil. That, of course, is one of the things determining oil prices at present.

Edward Leigh: I have asked the Comptroller and Auditor General to launch an inquiry into the costs incurred in rescuing Northern Rock, and he has agreed to do so. However, will the Chancellor tell the House what have been the costs incurred to date in issuing guarantees and indemnifying loans made by the Bank of England to Northern Rock, including professional advisers' fees incurred by the Treasury?

Alistair Darling: The fees of Goldman Sachs will be met by Northern Rock. As I said to the House earlier this week, we have made guarantees but they have not been called, so there has not been a cost to the taxpayer.

Phil Wilson: In the past few years, Trimdon 2000, a community group in my constituency, has received a grant of about £79,000 from the Northern Rock Foundation. Hundreds of similar community groups have received similar donations from that foundation. During his discussions on the future of Northern Rock, will my right hon. Friend ensure that the future of the foundation is secured?

Alistair Darling: As I have said on a number of occasions, I am very aware of the importance of the Northern Rock Foundation in the north-east. It depended on a significant income stream coming from Northern Rock in conditions that no longer exist. All of us, including my hon. Friend and his colleagues who represent north-eastern constituencies, would like to find a solution that helps the foundation; I know that that is also in the minds of those who have expressed interest in investing in Northern Rock. Trying to do something about it will require an effort on the part of us all, but I am very aware of the points that my hon. Friend has made.

George Osborne: At this time of economic uncertainty, people are looking to the central banks and their monetary policies, yet in Britain we still do not know who will be running the central bank come the summer. What exactly is the reason why the Prime Minister and the Chancellor are delaying the decision on the reappointment of Mervyn King?

Alistair Darling: I have dealt with this issue on many occasions. As I have said before, I will make an announcement—actually, Her Majesty the Queen will do so, as that is how such an appointment is announced—and it will be made at the appropriate time.

George Osborne: I am sure that Her Majesty will take the advice of the Chancellor and the Prime Minister when she makes her announcement. When Mervyn King was first appointed, that announcement was made in November for an appointment in June. At the beginning of this month, the Chancellor said at a joint press conference with the Prime Minister that he would make an announcement in the next few weeks; well, it has been a few weeks. What exactly is the reason for this continued uncertainty in the markets? Why cannot he simply say that he is reappointing Mervyn King? Let me put it another way. Is he looking at any other candidates for the job?

Alistair Darling: As I have said to the hon. Gentleman and to the House on many occasions, the appointment will be made at the appropriate time; that remains the case.

Lynda Waltho: Will my right hon. Friend consider the views of the Federation of Master Builders and those of 58 MPs who have so far signed early-day motion 669, calling for a reduction in VAT from 17.5 per cent. to 5 per cent. on repairs to and maintenance of existing buildings? Such a move would bring far more empty homes on to the market, assist home owners in making their homes energy efficient, and, importantly, assist groups such as the West Midlands Historic Buildings Trust to maintain heritage buildings such as Lye and Wollescote chapel in my constituency.

Jane Kennedy: I congratulate my hon. Friend on the persistence with which she is pursuing this subject. I can assure her that I have studied the terms of early-day motion 669. Alongside the zero VAT rate for the construction of certain new residential and charitable buildings, we have applied a 5 per cent. reduced rate for certain supplies related to housing. However, the problem is that we cannot implement the early-day motion proposal under the current European Union rules because there is no vires in EU law to allow any new reduced rate for repair and improvement work on non-residential buildings. I assure her that we keep the situation under review and seek to assist whenever it is possible to do so.

Anne Snelgrove: Some 9,400 families in my constituency receive tax credits, a minority of whom experience great difficulty with the system. What changes are my right hon. Friend's Department making to help those families and my hard-pressed caseworker, Julie?

Jane Kennedy: I suspect that my hon. Friend's caseworker is known personally to the staff of tax credit offices. Her Majesty's Revenue and Customs established the tax credit transformation programme to improve the services that families receive because that is very important for the success of this great project, which is now supported by parties on both sides of the House. HMRC has run several pilot projects, including a new national service to allow couples whose relationship has broken down to initiate a new single claim in one phone call. From the end of this month, it will also be revising its code of practice 26 on recovering repayments and replacing the reasonable belief test, which has caused a great deal of concern and difficulty in understanding, with a clearer test that sets out customers' responsibilities for checking factual information alongside the responsibilities that HMRC has to fulfil.

Laurence Robertson: I declare that I am a policyholder in terms of having my mortgage with Northern Rock—at the commercial rate, I stress. Many mortgage holders will be concerned about the possibility of having their loans called in, forcing them either to remortgage or to sell their homes. Under the various proposals being considered by the Government, what is the likelihood of that situation coming about?

Alistair Darling: I understand the hon. Gentleman's point; as we all know, he is not the only one who has a mortgage with Northern Rock, as I made clear the first time I made a statement after the recess last autumn. It is for the company, or whoever owns or controls it, to decide on what terms it issues mortgages or how it deals with mortgages as and when they come up for renewal. That is not something that the Government deal with.

Mark Lazarowicz: To return to the issue of VAT reduction raised by my hon. Friend the Member for Stourbridge (Lynda Waltho), the Government said in last year's Budget that they were seeking EU agreement to allow a reduction in VAT for certain energy-saving measures. Can my right hon. Friend give us an update on the progress that has been achieved on that?

Jane Kennedy: I can reassure my hon. Friend that those discussions are ongoing. I have been involved with them at ECOFIN, and we are pressing the case for the reduction. It is gaining support throughout Europe, but we are not yet in a position where we can change the rules to achieve such a laudable change.

David Heathcoat-Amory: Following the loss of child benefit data by Her Majesty's Revenue and Customs when on its way to the National Audit Office, I asked the Chancellor what other organisations and departments were in receipt of such personal data. The written reply failed to answer that question. Instead, it said that
	"Most transfers of data take place under statutory gateways"—[ Official Report, 3 December 2007; Vol. 468, c. 1038W.]—
	whatever they are. What about the data that go out of the HMRC that do not go through statutory gateways? Which departments and people are in receipt of those data, and why is there a continuing transfer of personal information, or leak, out of that department without parliamentary authority?

Jane Kennedy: No transfers take place without parliamentary authority. HMRC operates within clear guidelines and rules set down by Parliament. The transfer of data is a large part of HMRC's business. The management of personal data is a critical part of what it does, which is why it is right that we consider all of the representations that we receive from Mr. Poynter. We will also need to consider the police report when we get it. A great deal of work is being done to understand the procedures that are in place, how they work and their effectiveness in order to ensure that we have the most secure procedures possible in place.

Desmond Swayne: Why were the Government running such a substantial budget deficit ahead of forecast, even before the credit crunch bit?

Andy Burnham: The figures that I gave to the hon. Member for Poole (Mr. Syms) earlier show that this country has met debts at a lower level than any of our European competitors. If the hon. Member for New Forest, West (Mr. Swayne) is questioning our spending, let me quote the right hon. Member for Witney (Mr. Cameron) from his press conference last week—[Hon. Members: "Answer the question."] Just hear me out. The right hon. Gentleman said that
	"the government spending plans for the next three years are really quite tight...I think it represents a fairly tough approach to public spending."
	Given that the hon. Gentleman's party has several billion pounds of tax cuts promised, what does he propose to do about borrowing?

Desmond Swayne: Can I answer that, Mr. Speaker?— [ Interruption. ]

Angela Watkinson: What percentage of VAT registration numbers are issued within HMRC's two week target?

Jane Kennedy: I am assured that HMRC will have met the targets in place for such registrations by the end of January.

Anne Begg: With all the publicity about Northern Rock and various other things, it is important that the Government get the message across that it is right for people to save. But it is difficult for people to open a bank account if they do not have an address, they are not a householder or they do not have a passport. People under 16 have particular difficulty in opening a bank account. If we do not get young people saving at an early age, we are not going to change the public perception of saving, or encourage more people to save. What are the Government going to do about that?

Andy Burnham: My hon. Friend is absolutely right to raise that issue. I draw her attention to what the Government have done through the success of individual savings accounts. Nearly one in three adults—more than 17 million people—now have an ISA. She is absolutely right to say, however, that further work needs to be done to encourage those on lower incomes to make provision for their later life. She will know that we have piloted the savings gateway, which is a new approach to encouraging people to save, and we are considering the results of those pilots before making further decisions about extending the pilot more widely.

Andrew Robathan: Topically, I received a letter recently telling me that 31 January is my final deadline for a tax return, and encouraging me to file my tax return online, saying that that was the best way for me to do so. Given our discussions on the efficiency of HMRC recently, how come I have also been sent a letter from HMRC saying that I cannot file online? Does the left hand not know what the right hand is doing at HMRC?

Jane Kennedy: The hon. Gentleman raises a fair point. There are categories of individual for whom security is a higher priority. [Hon. Members: "Oh!"] Not just Members of Parliament—there are several categories of people in that position, and HMRC does not have the facilities for them to file online. However, it is working to see what can be done to change that in future.

Adam Price: With British Gas about to announce profits of £750 million, why has the Chancellor rejected Ofgem's proposal for a windfall tax on energy suppliers?

Alistair Darling: I met representatives of Ofgem about 10 days ago because I want to ensure that we have a competitive market in this country for electricity. The hon. Gentleman is right—several companies have announced significant increases for a variety of reasons, while other companies have been able to manage things differently and have not had to do that. However, Ofgem's proposals are just that—Ofgem's proposals.

Capital Gains Tax

Alistair Darling: With your permission, Mr. Speaker, I would like to make a short statement on capital gains tax reform.
	Following discussion, I am today announcing the introduction of a new capital gains tax entrepreneurs relief. This will complement the new regime, which I set out in the pre-Budget report last year. The reformed regime and the new entrepreneurs relief will come into effect in April.
	The relief will provide a special 10 per cent. tax rate for the first £1 million of qualifying gains. Gains made on different occasions will qualify for the 10 per cent. rate up to a cumulative lifetime total of £1 million. However, gains in excess of that will be taxed at 18 per cent. The special 10 per cent. rate will be available on the disposal of all or part of a trading business carried on by an individual either alone or in partnership. It will also be available to individuals disposing of shares in a trading company, provided that the individual is an officer or employee of the company and takes a minimum 5 per cent. stake in the business. The measure will benefit the owners of small businesses when they choose to sell their business, as well as business angels and other business investors who take a 5 per cent. or greater stake in the company concerned.
	As a result of the reforms that I have announced, entrepreneurs and material business investors will keep 90 per cent. of the first £1 million of gains that they make. And they, and everyone else, remain entitled to make gains of up to £9,200 a year without paying any capital gains tax. That annual exemption will rise again in April.
	We estimate that, next year, around 80,000 business owners and investors will make disposals eligible for the entrepreneurs relief. In approximately 90 per cent. of those cases, we expect the individual's entire gain to be taxed at the special 10 per cent. rate.
	In the other cases, people will pay 10 per cent. on the first £1 million of gains and the standard 18 per cent. rate on the excess. The proposal remains in line with the Government's objective of keeping the tax system as simple as possible. It is very much in accordance with representations from small business.
	I estimate that the proposal will cost around £200 million a year. Her Majesty's Revenue and Customs is today issuing further information about the scope of the new relief, along with draft legislation and supporting materials related to the capital gains tax proposals announced in the pre-Budget report. Those documents have been deposited in the Libraries of both Houses and are available on the HMRC website.
	As with all other aspects of the tax regime, I am determined that we do as much as possible to encourage entrepreneurship in this country and, in future Budgets, I will seek to do more. I will therefore keep the £1 million lifetime limit for the entrepreneurs' relief under review.
	I can confirm that we have retained the full range of reliefs for people investing in smaller, unquoted companies, including the enterprise investment scheme and venture capital trusts. Rollover relief also remains available to people wishing to reinvest in another business. Taken together, those measures include generous income tax reliefs, capital gains tax reliefs and exemptions, which have helped thousands of businesses. We have also retained several tax- advantaged share schemes, which include save-as-you-earn schemes, company share options plans and enterprise management incentives.
	In December last year, the Treasury and HMRC issued a consultation document, which included legislation designed to prevent individuals from disguising income streams as a capital return to avoid tax. I will set out the Government's next steps on measures to prevent abuse of the tax rules when the consultation process has concluded. I want to be satisfied that only genuine investors benefit from the reformed capital gains tax regime.
	I have also received representations from the life insurance industry. That is a complex area and there are no clear answers, but we are ready to hear further representations.
	The UK business environment remains one of the best in the world. I am determined to keep it that way. My announcement today, with measures to simplify the regime, will ensure that that continues to be the case. I commend the statement to the House.

George Osborne: In the short, inglorious time in which the Chancellor has been in office, he has had only one original idea on tax, which was a big increase in capital gains, thinly disguised as a simplification. It is now four months since he announced it—four months in which it has attracted the universal opposition of British business; four months in which his own Prime Minister has briefed against him; four months in which he has dithered and delayed on whether to ditch it; and four months in which thousands of businesses have faced uncertainty and instability, as we all waited for him to make his mind up finally.
	And so we reach today's humiliation, as the Chancellor of the Exchequer comes to Parliament, late in January, to announce a retreat on his one big idea. Does he remember saying in his very first interview in the job to the  Financial Times, back in the dim and distant days when he still had a reputation as a safe pair of hands, that he thought that we needed to be very clear that
	"When...we make...changes"
	to tax
	"they must be made at the proper time in the context of the Budget or the pre-Budget report"?
	Now here we are, halfway between the pre-Budget report and the Budget, and he is announcing major changes to dismantle the single-rate CGT regime before it has even been put into place. What a textbook example of how not to write tax law.
	May I ask the Chancellor about two features of his plan? First, will he confirm that it still represents a huge tax rise on businesses? He said that the move was a £200 million tax cut; in fact, if we take the whole package, it is a £700 million tax rise on enterprise, at the very moment we face the greatest economic difficulties. Can he name one other major western economy that is planning to raise taxes as its response to the global slowdown? Any claim that the Government are preparing Britain for the rainy days that may lie ahead now lies in tatters.
	Secondly, will he confirm that any pretence to simplicity has also disappeared today? In October, he told us that he was abolishing the distinction between business and non-business assets. Will he confirm that that distinction re-emerges today? He said at the Dispatch Box that
	"a single rate of capital gains tax is the right thing to do."—[ Official Report, 18 October 2007; Vol. 464, c. 957.]
	Can he confirm that he is introducing another rate, so that there are now two rates of capital gains tax? He boasted of the simple administration of his new regime. Can he confirm that the lifetime limit will require an entirely new administration within HMRC?
	Where does the Chancellor think the extra £700 million in tax will come from? Will it come from the people who start and build successful businesses or from the angel investors who help small companies get off the ground? What about the 4 million employees in the save-as-you-earn share schemes, who as far as I can tell will not benefit from the tax changes that he has announced today, or the entrepreneurs who add value to the British economy—in other words, all the very people whom we should be supporting in the face of global competition? No wonder the latest survey of business opinion, published today, shows that 59 per cent. of people think that he is out of his depth in his job.
	In the two years I shadowed the Chancellor's predecessor, with the exception of Budgets and pre-Budget reports, he never once came to make a statement to the House. But in the six months I have shadowed the right hon. Gentleman, he has been popping up every week, and sometimes twice a week, to explain the latest disaster to befall his Department—the mishandling of Northern Rock, the scandal of the missing discs and now this entirely self-inflicted wound on capital gains tax.
	The Chancellor is a decent and pleasant man, and many of the problems that he is dealing with were inflicted upon him by the Prime Minister. However, I am afraid that he is the living proof of what is called the Peter principle, which states:
	"in a hierarchy every employee tends to rise to the level of his incompetence".
	The misfortune for us all is that his incompetence means higher and more complex taxes on business at the very worst moment for the British economy.

Alistair Darling: I notice that at no time in the hon. Gentleman's contribution did he say whether he was for or against the proposal. It is a bit like Northern Rock—we are not at all sure what his position is from one day to the next. Indeed, I am beginning to think that he does not know either.
	The proposals that I announced last October were right then and I believe that they are right now. It is right to recognise, however, that we need to do more to help small businesses in particular, and the proposals that I have announced today will do that. As I have said, the vast majority of people who have put money into a company and built it up will benefit from the entrepreneurs relief. I believe that that will be welcomed by a large number of businesses.
	The hon. Gentleman asked about employee share schemes. I remind him that everyone in this country is allowed an exemption of £9,200 before they pay any CGT, so someone would have to make a gain—that is not a total shareholder—of that amount in a year. Actually, the average gain under save-as-you-earn schemes is between £2,000 and £3,000, so most employees will be covered by that. One of the interesting things about capital gains tax is that most of it is paid by a comparatively small number of people.
	The steps that I have announced today will provide a simpler scheme, with a rate of 18 per cent. We also recognise that we need to continue to encourage small businesses to expand, which is why I have introduced the entrepreneurial relief. That will benefit the vast majority of people who are likely to take advantage of it in the next year and in the years that follow. I will continue to keep these matters under review. It is far better to take the time to get these things right. That is what we have done, and that is what we will continue to do.

Rob Marris: I welcome the statement from my right hon. Friend. I wonder whether he can answer this question. If someone had a 20 per cent. ownership of a private equity company that traded in other companies, and that private equity company owned a very small proportion—less than 5 per cent.—of a plc that made a lot of profit, could that individual claim the relief that my right hon. Friend has described, on the ground that their investment was in a trading company, namely, a private equity company, that traded in other companies, and their holding of 20 per cent. was more than 5 per cent.?

Alistair Darling: I am always wary of giving tax advice on the Floor of the House. I set out in my statement the condition that the arrangement would apply to unincorporated trading companies with a shareholding of more than 5 per cent. Certain other conditions would also be attached. If my hon. Friend wants further details, he will find them in the Library. We are aiming the measure at people who have set up a business and are either sole traders or in partnership, or people who own more than 5 per cent. of the shares in their unincorporated business and are an employee or an officer of their company. They are typically the sort of people who have been encouraged to set up a business and might at some stage want to sell up and then invest further. The measures will also help people who have reached retirement, because the first £1 million of gains will be taxed at the 10p rate. Those are people we are aiming at.
	I said at the time of the pre-Budget report that, in relation to private equity, whenever there is a wide disparity between different rates—whether relating to income or capital—there is always a problem of people seeking to take advantage of capital gains tax. The 18 per cent. rate will help in that regard. In addition, as I said in my statement and as I have said before, we are seeking to close any loopholes in order to stop the kind of abuse that my hon. Friend might be concerned about.

Vincent Cable: May I take the Chancellor back to the beginning of his Odyssey through capital gains tax reform, and remind him of the moral outrage that was being expressed by, among others, his colleagues on the Treasury Select Committee at the fact that extremely rich people in the City were paying lower rates of tax than their cleaners? Will he confirm that, after all the twists and turns and comings and goings, those extremely rich people will now be paying 18 per cent.—or, in some cases, 10 per cent.—while their cleaners will now be paying 20 per cent. plus national insurance contributions? In what sense does that represent progress?
	Will the Chancellor also explain the impact of all this on the second homes market? Has not he given a tax cut to second-home owners—

Dennis Skinner: Like Chris Huhne?

Vincent Cable: Indeed.
	Has not the Chancellor given a tax cut to second-home owners of a minimum of 6 per cent. and, in certain circumstances, of 30 per cent.? Has he considered the impact of those measures on rural areas such as Cornwall, mid-Wales, the Lake district and large parts of rural England, where local people are being priced out of the housing market by second-home owners?
	Is the implication of the Chancellor's retreat today and his move away from taper relief that he accepts that the changes brought in at the outset of the Labour Government, when I believe he was Chief Secretary to the Treasury, were—as, indeed, some of us argued at the time—expensive, unnecessary and a diversion? Will he tell us what was wrong with the capital gains tax system under the previous Conservative Government, which was introduced by Lord Lawson? That system had at its heart a very simple central principle that income and capital should be taxed on the same basis. If, as the Chancellor is arguing and as the Conservatives now appear to want, income is taxed at a significantly higher rate than capital, there is a massive opportunity for tax avoidance as individuals and companies convert income into capital. What estimate has the Treasury made of the potential leakage into tax avoidance from that very familiar route?
	Finally and on that basis, may I commend the idea of going back to the 1997 capital gains tax system, which was simple, made generous provision for small business, had indexation and would, on the Treasury's own estimates, produce an additional tax revenue of about £2.7 billion? That could be used now for cutting the taxes of cleaners and other people on low pay.

Alistair Darling: I do not know of many people who would argue that capital gains tax should be put back up to the 40 per cent. rate. If that is the Liberal party policy, I was not aware of it—and I am sure that many of the hon. Gentleman's colleagues are not aware of it either. I suspect that two parties in the House will make it their business to ensure that people around the country know that that has become the Liberal party's policy. As the hon. Gentleman has set out, the Liberal policy has been to end taper relief.
	I believe that our proposals of October and of today provide the right approach. Simplifying taxes must be a good thing if we can do it. What I sought to do in October was set out a much simpler capital gains tax system at a rate of 18 per cent., but I recognised that we needed to do more to help small businesses in particular. As I said earlier, there are 760,000 small businesses in this country. There is additional help—it is important to remember this—through venture capital trusts and enterprise investment schemes. The enterprise schemes have raised about £6 billion and have invested in 14,000 companies, while venture capital trusts have raised about £3 billion and helped about 1,400 companies. That shows that there are many other things we can do to help small businesses through the capital gains tax and income tax regimes. I believe that what I have announced today will be good for small businesses. I have listened to what people have had to say and I believe it important to get the issues right. Overall, simplifying the tax has to be the right way forward. I can see no justification for putting the rate of capital gains tax back up to 40 per cent., which is what I now understand the hon. Gentleman's and the Liberal policy to be.

John McFall: May I welcome the Chancellor's statement? It is a huge step forward to have moved in 10 short years from a tax rate of 40 per cent. to 18 per cent. and with accompanying simplification. It is important for the Chancellor to continue to encourage entrepreneurship, which includes the private equity industry. However, may I say that there is a loophole in that management fees are not taxed? That information has come to me from the private equity industry, so I hope that the Chancellor will seek to close that loophole.
	The insurance industry has also had discussions with me over the last couple of weeks and it is concerned that the new regime will disadvantage savers. I would ask the Chancellor to have further discussions with that industry to ensure that we do everything we can to encourage savings.

Alistair Darling: I am grateful to my right hon. Friend for his welcome. On his last point about the insurance industry, I did say that we have had discussions with that sector, but there are particular problems with one particular set of products. It is not immediately obvious that sorting out that problem will not create other problems. As I said, Treasury officials will remain in discussion with the industry. If we can resolve that problem, let us do so, but I believe that there may be considerable difficulties in doing so. As to the loopholes and various other points that my right hon. Friend raised, I keep them all under review. As a result of what I have announced today, I hope that small businesses, whose organisations have called for help of this nature, will recognise that we are determined to do all we can to help them. People who have made the effort and put all their skills and enterprise into setting up businesses should be helped to grow them and then hopefully to grow other businesses. We want to do everything we can to help them.

Iain Duncan Smith: It is a bit rich for the Chancellor to come here and accuse my hon. Friends on the Front Bench of not saying whether they are in favour of or against the proposals, when he has been both against his own proposals and in favour of them at almost exactly the same time? Will he now accept that his Chief Secretary has let the cat out of the bag, as he has recently made it absolutely clear that under the new set of proposals people in Britain will be subject to a significant tax hike?

Alistair Darling: I do not think that that is right. I have just explained that the cost of the proposals announced today is about £200 million, which will go back into the small business sector. It is important, however, that we not only help small businesses but maintain stable finances in this country. I am not sure that the right hon. Gentleman was a supporter of the Conservative Government all the time in the 1990s, but he will certainly remember that they got into real difficulties because they could not manage their own finances.

Tom Levitt: Any tax system must have the confidence and consent of those involved in it, and today's statement is a fair and sensible response to the consultation that has taken place. Will my right hon. Friend confirm that if the two owners of a hypothetical company of 40 or 50 employees, which has been established for about 30 years, for example selling management services to the not-for-profit sector, sold that company this year, the tax regime would be more generous now than it would have been under the taper system that preceded it?

Alistair Darling: As my hon. Friend describes, there are advantages for people who have set up and are perhaps considering selling small companies. If the other measures are taken into account, such as the small loans guarantee, the enterprise investment scheme, venture capital trusts and the regional help given, we are doing a lot to help small businesses, as well as helping the employees. It is also important to remember, as it is sometimes overlooked, that people have an individual annual tax allowance of £9,200 before they pay any capital gains tax. The proposals that I am announcing today represent significant help to a lot of small businesses, as we expect about 88,000 to be able to take advantage of them next year, most of them paying the 10p rate not the 18p rate; and the 18p rate is significantly less than the 40p rate that we had under the Tories and which the Liberals apparently want to reinstate.

Michael Jack: What has puzzled me about the Chancellor's announcement is that when he was first in the Treasury he espoused tapered tax as a key ingredient of long-term, stable capital formation and business investment. He has now abandoned that, so if he wanted to retain the advantages of his first premise, why has he not grandfathered the rights of the existing system to existing investments? If he wants his claimed benefits from the new scheme, why does he not move to that for new investments?

Alistair Darling: Quite simply because I think that that would make the system very complicated and difficult to administer.

George Mudie: I welcome the main thrust of the Chancellor's announcement, but I would like to return to the item raised by the Chairman of the Treasury Committee, on life insurance. The Chancellor has indicated that he accepts that the issue is complex and he appears to accept that there are real difficulties for the life insurance industry. As we are nearing the end of January, and the new rules will operate from 1 April, can he give that industry, which is clearly worried about the proposals, any hope of some help before April?

Alistair Darling: As I said to our right hon. Friend the Member for West Dunbartonshire (John McFall) and others, and as I said in the statement, I am aware of the issue, which has been raised with me by the Association of British Insurers and individual insurers. If we can, we would like to try to help them. As I said to our right hon. Friend, however, it is not immediately obvious that the particular problem raised can be easily resolved. I have asked my officials, however, to speak to the industry's representatives, and they will do so over the next few days and beyond. I hope that we can find a resolution, but I do not want to raise hopes because the issue is quite complex.

Julia Goldsworthy: My hon. Friend the Member for Twickenham (Dr. Cable) raised the question earlier, but I am not sure that I caught the Chancellor's response. Can he confirm that second-home owners will see a cut in their CGT bills? Was that an intended or unintended consequence of his proposals?

Alistair Darling: If there is a single rate, and we move away from the old system of a number of rates, does it not follow that some people will gain? Because we have a single rate of 18 per cent., that is less than some people might have paid on previous occasions.

Patricia Hewitt: I am sure that my right hon. Friend's statement will be warmly welcomed by many small business owners in my constituency. He will be aware, however, that at the time of his initial proposal real concern was expressed that the simplification measures, although otherwise welcome, might disadvantage employee share ownership plans. Is he satisfied that the proposals that he has announced today will encourage companies to maintain, and indeed extend, their employee share ownership plans?

Alistair Darling: As I said earlier, the average gain under such employee schemes is between £2,000 and £3,000. Everybody in the country has an annual exemption for capital gains tax of £9,200—every year—so the vast majority of people would come nowhere near paying CGT. The number of people who benefit from capital gains tax exemption in such schemes is growing, because more people are in such schemes. I want to encourage that; I have always believed that employee share ownership schemes should be supported. My proposals will help small businesses, and the annual exemption, which will go up again in April, will ensure that many of the people about whom my right hon. Friend is concerned will be more than covered.

Andrew MacKay: As today's statement, far from complementing the previous proposals, is clearly a retreat, what lessons has the Chancellor learned from this sad affair? For instance, in future will he properly consult business before putting forward such tax proposals, which have caused such chaos and uncertainty?

Alistair Darling: Of course we will listen to what businesses—small and large alike—have to say. It is important that we introduce the right tax regime. What I propose today is right. We have introduced an overall simplification, but we recognise the particular circumstances of small businesses, which we want to encourage to grow. That is why I have introduced the measures.

David Taylor: Is the Chancellor convinced that people are being given adequate time to plan their affairs, particularly if we are dealing with the disposal of businesses as opposed to liquid assets such as quoted shares? Is there not a risk that forced disposals will take place, and that people will be disadvantaged because of the decisions taken at this time? Could taper relief not be extended, at least for a period? There is no requirement for it to end at midnight on 5 April, is there?

Alistair Darling: No, but the overall thrust of what people are saying is that they want certainty as to what the regime will be from April. To add a further uncertainty by putting it off for a year or so would not have been particularly helpful. What I propose now means that people know exactly the position and can plan accordingly. As my hon. Friend will know, it is not uncommon in Budgets for the tax changes to take place that evening. What is needed is some degree of certainty, and that is what I have provided today.

Mark Prisk: This statement is as inadequate as the Chancellor has proved himself to be incompetent on the issue. Many owners of small businesses have said to me that, after 15 weeks' delay, as many right hon. and hon. Members have said, entrepreneurs will still lose £700 million. It will only be the smallest firms who will be spared, and then only if they remain the smallest. What kind of message does that send to the ambitious entrepreneur—the real wealth and job creators? What place do they now have in Labour's Britain?

Alistair Darling: The tax regime in this country, whether it is the lowest corporation tax rates that we have ever had—due to come down again in April—the capital gains tax regime, or the incentives provided through enterprise investment schemes or venture capital trusts, has a whole range of measures that have helped businesses. On top of that, we have been able to maintain a strong and stable economy, with low levels of inflation, which has also encouraged long-term investment. That is very different from the situation 15 or 20 years ago.

Chris Bryant: Analysis of the economy in my constituency shows that it contains about a third of the number of businesses in the average constituency in the land. That is partly because of the devastation wreaked on the economy in south Wales by another political party, but will the Chancellor confirm that he will do more to encourage entrepreneurship in former coalfield areas, and that he will ensure that the enterprise investment scheme and venture capital trusts really do deliver more jobs and more small businesses in those peripheral economies?

Alistair Darling: My hon. Friend is right: the Tory party paid scant attention to communities like his that were devastated when the mines were shut in the 1980s. The situation in many parts of the country has changed almost unrecognisably since then.
	We have introduced a range of measures, including regional venture capital funds and specific arrangements to assist people through reduced income tax, corporation tax and capital gains tax. That has helped businesses, which is why, as I said, there are more than 760,000 more small and medium-sized enterprises in the country than there were 10 years ago. But yes, we will continue to do all we can to encourage small businesses, because they are the engines of future growth. Ninety per cent. of businesses that are likely to take advantage of my announcement next year will pay the 10p rather than the 18p rate—which, of course, is infinitely better than the 40 per cent. rate with which they were confronted more than 10 years ago.

Adam Price: Does the Chancellor not understand that offering a tax break to second-home owners will make investment in second homes even more financially attractive and will put further pressure on house prices, especially in rural areas, making them even less affordable than they are now? Are the Government not making the same mistake that they made with self-invested personal pensions? Having originally proposed to include second homes as a qualifying asset, they then had to withdraw the proposal because of precisely the objections that are being made now.

Alistair Darling: I think the real answer to the problem that the hon. Gentleman has raised—and the shortage of housing is undoubtedly a problem in rural areas, as it is in urban areas—is for us to recognise the need to increase the supply of housing as a whole. I hope that Members in all parts of the House will support the Government's measures both to encourage more housing and to reform the planning laws; otherwise we shall continue to experience the problem of far more people needing housing than there are houses, which will force prices up. It is important for us to recognise the fundamental problems that we face in this country.

Jim Cousins: I understand my right hon. Friend's motives, but new reliefs will mean new opportunities. Tax changes behaviour. Can my right hon. Friend assure us that firm measures will be taken to prevent income being switched to capital and the real benefits going not to business angels but to money magicians?

Alistair Darling: I said in my statement that I would keep that under review. If there is any sign of abuse of this or, indeed, any other part of the tax system, the Government will be ready to take the appropriate action.

Douglas Hogg: Will the right hon. Gentleman confirm my understanding that his October proposals, as modified today, involve the removal of the indexation of the acquisition costs in respect of a number of years from the early 1980s to the end of the 1990s? If so, is that not a form of retrospective taxation which should be deeply deplored, depriving people of a reasonable expectation in regard to acquisition costs? Perhaps I should add that I come into one of those categories.

Alistair Darling: It is good of the right hon. and learned Gentleman to say that.
	One of the many changes that we have made in an attempt to simplify the system relates to indexation. I understand the right hon. and learned Gentleman's point, but the tax system does change from time to time, especially in relation to capital gains. It is quite possible that something may be acquired long before a particular tax measure is introduced. Capital gains tax is a relatively new tax: it was only introduced in 1965.
	I am trying to simplify the tax system, which is something that people in the House and outside have asked successive Chancellors to do. I readily accept that once we do start to simplify a tax, we soon hear from those who did not want that particular simplification.

Mark Harper: Many Members have commented that the combination of the changes announced today and those announced in the pre-Budget report represents a tax increase of £700 million, and the Chancellor has not denied that. For the avoidance of doubt, will he confirm that it is indeed the case?

Alistair Darling: If the hon. Gentleman cared to look at the figures that we published in the pre-Budget report, he would see exactly what the changes meant. It is hardly a secret; it is in documents published at the time of the pre-Budget report.

Mark Field: Like many Members, in these sorry circumstances I support the proposal, although it flies in the face of the simplicity that was the whole idea of the original statement in October.
	It is important to have a sense of perspective. I think that between 1945 and 2002 most business owners would have been delighted at the prospect of not having to pay tax on 82 per cent. of their earnings, but that is partly a function of being in a global economy. Does the Chancellor not recognise, and will he not confirm, that this climbdown will require yet more anti-avoidance measures?

Alistair Darling: I am grateful to the hon. Gentleman. He has endeavoured to give a fair assessment of what I am proposing, and he is the first Conservative Member to say that it might actually merit support. He is right: obviously the tax rates have changed over the years. I do not think many people apart from the hon. Member for Twickenham (Dr. Cable) believe that capital gains should be taxed at 40 per cent. I think that a lower rate is right, and our rate is comparable with international rates.
	I believe that this measure will help small businesses. I believe that all Members believe that people who take the trouble, put in the effort and have the initiative to set up and develop such businesses ought to be supported, and that is what I am trying to do.

Business of the House

Harriet Harman: The business for the week commencing 28 January will be as follows:
	Monday 28 January—Consideration of Procedural Motions relating to the European Union (Amendment) Bill.
	Tuesday 29 January—Debate on the treaty of Lisbon provisions relating to fighting cross-border crime; justice; policing; human trafficking; and asylum and migration policy, followed by consideration in Committee of the European Union (Amendment) Bill [1st Allotted Day].
	Wednesday 30 January—Debate on the treaty of Lisbon provisions relating to energy, followed by continuation of consideration in Committee of the European Union (Amendment) Bill [2nd Allotted Day].
	Thursday 31 January—Topical debate, subject to be announced, followed by remaining stages of the National Insurance Contributions Bill.
	Friday 1 February—Private Members' Bills.
	The provisional business for the week commencing 4 February will include the following:
	Monday 4 February—Motions relating to the police grant and local government finance reports.
	Tuesday 5 February—Debate on the treaty of Lisbon provisions relating to human rights, followed by continuation of consideration in Committee of the European Union (Amendment) Bill [3rd Allotted Day].
	Wednesday 6 February—Debate on the treaty of Lisbon provisions relating to the single market, followed by continuation of consideration in Committee of the European Union (Amendment) Bill [4th Allotted Day].
	Thursday 7 February—Topical debate, subject to be announced, followed by motions relating to European Standing Committees.
	I should also inform the House that the business in Westminster Hall for 31 January will be as follows:
	Thursday 31 January—A debate on working in partnership to reduce reoffending and make communities safer.

Theresa May: I thank the Leader of the House for giving us the forthcoming business. Today the House finally sees the motions for Monday's debate on procedure relating to the European Union (Amendment) Bill and debates on the Lisbon treaty. Labour Back Benchers, however, have had this knowledge for days, courtesy of a document circulated by the Government Chief Whip. The Leader of the House has given us two weeks' business, but according to the list that I have, Labour Back Benchers know the dates of business until the end of February. If they know, why does the Leader of the House not have the courtesy to tell the whole House?
	This morning the Home Secretary appeared on the "Today" programme giving details of the Counter-Terrorism Bill before it was published for Members of the House. Yet again, the Government have put the media before Parliament. Every week the Leader of the House tells us that she puts Parliament first, and every week her colleagues treat Parliament with disdain.
	Last week I asked the Leader of the House about issues of vital importance to Members and the public. Instead of responding properly, she said,
	"if there is a bandwagon, she will jump on it and if there is a myth, she will peddle it."—[ Official Report, 17 January 2008; Vol. 470, c. 1079.]
	I had raised Northern Rock, organ donation and the security of personal data. Which of those issues does the Leader of the House consider to be a bandwagon or a myth?
	In view of the recent downturn in international financial markets, may I suggest the state of the British economy as a subject for a future topical debate? On Monday the Secretary of State for Defence announced that the Ministry of Defence had lost a laptop containing the bank details of 3,700 Army applicants. It lost a further two laptops containing personal data on Tuesday, and yesterday the Ministry of Justice announced that it had lost four CDs containing the restricted data of court defendants, witnesses and victims. When will we have a debate on the Government's systemic failure to protect our personal information?
	Given this record on data management—or mismanagement—it is no surprise that within two weeks, the Prime Minister has changed his mind and delayed the introduction of the identity card scheme; and we have learned today that two companies have pulled out of the procurement process for the scheme, including Accenture, the very company the Minister for Borders and Immigration used to work for. This is a shambles. The scheme is clearly in administration and should be liquidated. When will the Home Secretary come to the House and make a statement on the ID card scheme?
	As a London MP, the right hon. and learned Lady will be aware of the concern being raised about the Mayor of London. Does she not find it extraordinary that the Mayor has defended his senior staff using their paid time to run a smear campaign against Trevor Phillips? May we have a debate on the abuse of power by Mayor Livingstone?
	The Prime Minister has written a book about courage: it was clearly not an autobiography. He did not have the courage to sign up to the EU reform treaty alongside other leaders, he did not have the courage to vote for the Bill on the treaty on Second Reading, and he has not had the courage to give the British people a referendum. So can we have a debate on courage and leadership?
	We have a Prime Minister who dithers, delays and dodges on matters of crucial importance to our country. When will he finally get a grip and start running the country, instead of running away from difficult decisions?

Harriet Harman: Let me begin by explaining how we intend to deal with the important debate on the European treaty. The European Union (Amendment) Bill is brief—it contains only eight clauses—but we know that the treaty that it would bring into effect is of concern across the House in relation to energy, the economy, international development, the environment and cross-border crime. We have sought to arrange debates so that Members can discuss both the structure of the Bill and any amendments they might wish to make to it, and the substance of the treaty that the Bill brings into effect. The order of business is before the House today. There will be an opportunity next Monday to discuss the procedure, so there will be a full debate on the procedure before we move on to the substance on Tuesday. Of course it is possible for provisional plans to be discussed—as they sometimes are—with the Opposition and with individual Members, but what is of particular importance is that the Government lay their motions before the House early enough for Members to know how the debate is intended to proceed, and for them to be able to amend those motions if they see fit. That is what we have done in our handling of the Bill.
	The whole House can see today on the Order Paper—

Theresa May: Not the whole House. Not the dates.

Harriet Harman: The whole House can see the dates on the Order Paper for the days allotted for the business, where it is confirmed.  [Interruption.] As the business is confirmed, we put it on the Order Paper.
	As for the Home Secretary and the Counter-Terrorism Bill, Members know that there has been a great deal of discussion about how we can ensure that we safeguard people in this country from acts of terrorism, while also safeguarding civil liberties. During the course of that debate, the Home Secretary has given evidence to the Home Affairs Committee, which has discussed her proposals and issued a report, and she has responded to it. It is necessary for the Home Secretary to consult Members, the Opposition Front Benches and outside organisations. The detail of the scheme in the Bill has not been made public, and will not be until it is published to this House.
	The right hon. Lady talked about the economy. It is important for us to bear in mind that our economy is in a good position to weather the international economic storm. In such circumstances of international economic turbulence, I do not think the Opposition should talk down economic confidence in the British economy.
	On data protection, we have had written ministerial statements from the Ministry of Justice and oral statements from the Ministry of Defence and the Chancellor of the Exchequer. Government Departments and agencies collect important data so that they can do their jobs properly, and as the right hon. Lady will know, there is a cross-departmental review of how we ensure that individuals' details are not put at risk by breaches of data protection rules. When that review is complete, no doubt we will report the conclusions to the House. It is right that we bring the House up to date as and when we discover that there have been breaches of data protection, and we shall continue to do so.
	The right hon. Lady raised the identity card scheme and talked about a delay. Let me explain to her that there is a phased introduction of this process: first, biometric data on passports; then biometric data on visas; and it will then include biometric data on cards for some people, such as those who work in the security industry. We have always said that there will be a phased approach and we will learn lessons as the phases roll out. Should we, on the basis of the lessons we learn, want to extend it to make it compulsory for British citizens, it would be brought back to this House for a debate and a vote. That has been the situation, and it remains so.
	The right hon. Lady talked about the Mayor of London. As London's Mayor, Ken Livingstone has revitalised the city. I am sure that Members will agree that London is the greatest capital city in the world. It is on his record, which speaks for itself, that London voters— [Interruption.] The Mayor of London holds an elected post, and Londoners will decide on his record at the ballot box in May.

Several hon. Members: rose —

Madam Deputy Speaker: Order. May I ask for single questions to the Leader of the House and a brief response, as many Members hope to catch my eye?

Keith Vaz: I missed the Home Secretary on the "Today" programme, as I was recovering from having attended the march protesting against the Government's decision on police pay. I welcome the fact that, as a result of the anecdotal discussions that have been taking place, the Government have accepted a number of the Home Affairs Committee's proposals in their counter-terrorism proposals. May we have a debate on the Committee's proposals over the next few weeks—if not on Second Reading then independently of that—as that would aid a further discussion by Members on how to approach this important subject?

Harriet Harman: The Committee has produced its report, and the Government have produced their Bill. The next opportunity for the House to debate this important issue will be on Second Reading of the Bill.

Simon Hughes: The Leader of the House has announced that on Monday week we will debate and vote on motions relating to the police grant and local government finance. There is huge concern in the country about the police needing adequate funding as well as adequate pay. There is also great concern across local government, of all parties, because the settlement means that council tax will have increased by 100 per cent. in 10 years, whereas if education is taken out, the money available for councils for things such as social services will have increased by 14 per cent. in real terms over 10 years. Given those concerns, may we have entirely separate debates and votes on those matters? Can we have a police debate and a local government finance debate? They are separate subjects, separate budgets are involved and the organisations are separate. We always used to take that approach.
	Will the Leader of the House guarantee that the five motions on the Order Paper in the name of the Secretary of State for Communities and Local Government dealing with local government reorganisation in Cornwall, Wiltshire, Shropshire, County Durham and Northumberland will each be the subject of a separate debate, so that they can be properly decided upon, as they deserve to be?
	The Leader of the House has announced that at the end of the week after next, we will consider motions on the scrutiny of European Union legislation. That is a matter of considerable interest in the House, and her deputy has consulted colleagues about it. May we see the results of that consultation, and a report on it, in good time before we see motions and are asked to debate the proposals for better scrutiny of European Union matters?
	Today, the written statement by the Secretary of State for Justice on the Government's long-promised review of electoral systems has been published. One of my friends said that it was more like an A-level piece of work or an undergraduate thesis than a great Government study. Irrespective of that, may we have an opportunity to debate across the board the way in which electoral systems have worked well or badly at different levels of government, so that the Government can honour their manifesto commitment in reality, rather than just in word?
	Today, we learned that eight Russell group universities have underspent significantly—by hundreds of thousands of pounds—the money allocated for bursaries to improve access among the poorest and most disadvantaged families, and that four others have not even disclosed their figures. Can we have either a statement from the Secretary of State for Innovation, Universities and Skills or a debate to ensure that a policy on which we all agree—ensuring that people get to university irrespective of their background or means—is delivered? We do not want to find, as is happening at the moment, that people are not taking it up because the money is sitting in the bank.
	Lastly, terrible prevarication has taken place over whether the war veterans entitled to disability pensions who have been paid the wrong amounts will have to repay the sums, which are sometimes in the order of thousands of pounds. The Ministry of Defence said that it would repay them and would write the money off, then it said that it could not do that because the Treasury had to be consulted, and now the people involved are told that they must wait for another couple of months before those two Departments get their act together. Can we please have an announcement on this, either from the Chancellor or from the Secretary of State for Defence? I hope that such an announcement will say that war veterans who have served their country and been disabled in that cause will not have huge debts that have to be repaid because of a Government mess.

Harriet Harman: On the question of the universities and bursaries, which is an important issue for hon. Members across the House, I shall ask the relevant Secretary of State to respond to the hon. Gentleman's point in writing and place a copy in the Library. I shall do the same in respect of the overpayments made to war veterans and how the MOD is proposing to handle the matter. All of us are concerned that our war veterans should be treated in the most careful sensitive way, commensurate with the duty that they have done for their country, which we all respect and admire.
	The hon. Gentleman proposed a debate on the electoral systems review that has been published by the Ministry of Justice. I suggest that if he thinks fit, he could propose that subject for an Opposition day debate, or he could seek a Westminster Hall debate on it. He also mentioned this House's scrutiny of European legislation. As he said, my hon. Friend the Deputy Leader of the House has consulted widely on how we can ensure that this House gives more effective scrutiny to legislation that comes from Europe. The hon. Gentleman makes a good suggestion, so I shall consider, with my hon. Friend, whether we could issue forthwith a written ministerial statement so that people could see how we intend that the House should deal with this matter before we table the resolutions that would give effect to the determination that we have made.
	Sufficient time will be given to discuss the local government situation in relation to the counties that the hon. Gentleman mentioned. There will also be sufficient time to debate both police matters—how we increase police numbers as well as increasing their pay—and how we handle council tax. We have put those issues on one day, and we think that there will be adequate time for debate.

Colin Burgon: May I let the Leader of the House know that there is growing disquiet among some Labour Members about the compressed timetable and the arbitrary selection of themes that we will be discussing in relation to the European treaty? Does she agree that our opting out of the charter of fundamental rights, as it affects working people, is at least worthy of one full day's debate? That would give the Government a wonderful opportunity to prove people such as me, who feel that the EU is heading in an increasingly neo-liberal direction, wrong.

Harriet Harman: On the fourth day of debate, which starts next Tuesday, we will propose to the House that there be four and a half hours' debate on the very important issue of how our membership of the European Union helps our economy, and how we should ensure that everyone working in the European Union and in this country has good minimum standards of terms and conditions.

Oliver Heald: Can we have a debate in Government time on early-day motion 512, or a similar motion, that would give us a chance to vote on the Government's decision to dishonour the police pay agreement ?
	 [That this House is disappointed by the failure of the Government to accept in full the recommendations of the Police Arbitration Tribunal police pay award; believes that the pay settlement should be backdated to 1( st) September; notes that the police are the front line in the fight against organised crime, terrorism and anti-social behaviour; recognises that their work puts them at great personal risk; further believes that this dispute over 0.6 per cent. difference is petty and needless; and calls upon the Government to reconsider its decision.]
	Does she agree that we owe it to the 22,000 people who came to Westminster yesterday—those of us who went to the rally saw how passionately they feel about this breach of trust—to have a debate and a vote in this House about such an important matter? That agreement has lasted 28 years, and it is a disgrace for the Government to break it in this way.

Harriet Harman: I pay tribute to the work of the police. Their pay has increased ahead of inflation since we came into government. The Prime Minister has said that we would like to pay them even more, and I think we would all agree with that. However, we must ensure that there is no risk of inflation. We hope in future to secure an agreement with the police on a three-year pay settlement—but legally, police pay is a matter to be determined by the Home Secretary.

David Wright: Can we have a topical debate on the cross-party campaign to secure a medal decoration for military personnel injured in Iraq or Afghanistan, similar to the American purple heart medal? Such a measure has cross-party support, and we need to discuss it in the House.

Harriet Harman: I think that that would be a good subject for a topical debate, and I shall consider it. I think that the whole House would want the opportunity to show the admiration and support in this House, and in the country as a whole, for our troops fighting bravely in Iraq and Afghanistan. My hon. Friend makes a proposal about recognition and war medals. He will know that that is a matter for the armed services to propose to the MOD, but an expression of this House's opinion would assist in that process. I will take his proposal forward.

Michael Spicer: Will the Leader of the House confirm that in real terms, the pay of Members of Parliament has decreased in recent years?

Harriet Harman: I will confirm that point—and we will debate this subject for a number of hours at the conclusion of business questions.

Douglas Hogg: Will the right hon. and learned Lady arrange for the Justice Secretary to come to this House next week to make a statement on low copy number DNA? She will be aware of the judgment made at the back end of last year on the Omagh bombing, as a result of which there is considerable anxiety about the evidential value of such DNA both in past cases and in prospective cases. We need to know where we stand. May I declare an interest? I am a criminal barrister too, and I have a professional interest in one such case.

Harriet Harman: On the question of low copy number DNA evidence being material to past convictions, there is a procedure for any defendant or offender who has been convicted who wants their case to be reopened or who has yet to finish the appeal process. In future, prosecution authorities will have looked carefully at that judgment and will consider how to go forward.

Julie Morgan: When can we have a debate about the performance of the train operating companies? I am sure that the Leader of the House is aware of the problems related to First Great Western, which provides the service from Paddington to south Wales. I commend the company for its efforts on Monday, when I was on the first train to go through the floods around Swindon—at 5 mph. Everyone rallied together and the managers and staff produced tea and coffee. Today, the Passenger Focus report shows that First Great Western is at the bottom of the customer satisfaction league. There are particular concerns about prices and delays. Can we have a debate on that?

Harriet Harman: Members of the Select Committee on Transport will have the opportunity to raise my hon. Friend's important point with the Secretary of State when she appears before the Committee next Wednesday.

Lindsay Hoyle: On Monday afternoon, Jessica Knight, a 14-year-old girl who is a constituent of mine, was subjected to the most sickening, horrendous and frenzied knife attack in Astley park, Chorley. I am sure that my right hon. and learned Friend would agree that that case highlights the threat faced by members of the public from those carrying knives. Will she assure me that the plans laid out by the Prime Minister to impose stricter sentences on those found carrying knives—as well as on those who carry out such sickening attacks—in order to tackle knife crime will be implemented as a matter of urgency? I am sure that the thoughts of the whole House are with my constituent. She is in a critical stage, hanging on and fighting for her life.

Harriet Harman: I am sure that the whole House will support and agree with the comments made by my hon. Friend about his constituent, Jessica Knight, who was subjected to that horrendous attack. Of course, the Government must take serious and violent crime seriously. We must ensure that we have the right penalty, the right prevention and greater support for victims.

Alistair Carmichael: May I take this opportunity to wish you, Madam Deputy Speaker, the Leader of the House and all hon. Members a very happy Burns nicht tomorrow? Can we have a look at tomorrow's business to see whether it might be possible to have a short examination of the growing concern about the possible shortage of haggis, which is of course essential to every good Burns supper? The problem was highlighted by Improve, the independent sector skills council. It is concerned that the withdrawal of European social fund support for training in the calf butchery industry will have an impact and will lead to a lack of skilled butchers who are able to produce this finest of foods. Will the Government act to protect the
	"chieftain o' the puddin'-race"
	or will they each just be a
	"Wee, sleekit, cow'rin', tim'rous beastie"?

Harriet Harman: I shall draw the hon. Gentleman's question to the attention of the relevant Minister. I am sure that we all wish everybody a happy Burns night; I seem to be going to a Burns night dinner not tomorrow but next Friday.

Jon Trickett: Will my right hon. and learned Friend organise a debate on town and parish councils? That would allow me to celebrate the work of so many town and parish councils in my area and, in particular, to condemn the irresponsible action of the independent group in Featherstone, which has gone for a tax increase that would get into the Guinness book of records—an 800 per cent. increase in the precept—despite the fight put up by the local Labour party. That will substantially damage pensions, in particular, as it will take most of the increase. Such a debate would allow us to explore the mysterious decision to put half of the increase—

Madam Deputy Speaker: Order. I think that the Leader of the House has got the message that the hon. Gentleman is sending.

Harriet Harman: We all pay tribute to the important work that is done in town and parish councils. It is disappointing if groups such as the Featherstone independent group bring that independent civic work into disrepute by behaving in the way that my hon. Friend has described.

Justine Greening: Given the importance of how the Mayor of London is running his office and how he is spending taxpayers' money in London, can we have a topical debate to find out why the Greater London Authority Act 2007 will give the role even more powers, especially as there are problems with the checks and balances on it? In the light of the recent statement made by the Secretary of State for Work and Pensions, does the Leader of the House think that the Mayor of London should resign to clear his name, too?

Harriet Harman: The previous Government abolished the Greater London council, the authority that was democratically elected to run London. We set up a Mayor of London in order to allow people in the hon. Lady's constituency, in mine and throughout London to have their say. I pay tribute to the work of the Mayor, who was elected democratically by the people of all of London. Next May, it will be the responsibility of the electors to have their say on how he has done his work. We have full confidence in him. We cannot tell whether we are fully confident in the work done in this House by the hon. Member for Henley (Mr. Johnson), because we never see him.

Mark Lazarowicz: May I suggest to my right hon. and learned Friend that the subject of next week's topical debate should be the situation in Gaza, which gets worse by the day? I ask her and the Government to agree that the Israeli Government should lift their blockade of Gaza, which is holding an entire population to ransom. That is against all principles of civilised behaviour and is clearly in breach of international law.

Harriet Harman: There is a debate this afternoon in Westminster Hall on the middle east. I think that everybody will be concerned by the developments that have been reported overnight.

Mark Harper: The Leader of House will know that today the Secretary of State for Justice has published a document about the review of voting systems. He said that it remained the Government's view that, as a change to the voting system used for this House would have significant effects on the way in which democracy works, it would come into effect only if it were endorsed by a referendum. What confidence should the public have that that promise of a referendum on any change to the voting system will mean any more than the promise of one on a European constitution?

Harriet Harman: We have made it clear that any decision to change the way in which Members of this House are elected, by going from first past the post to a proportional system, would not be for us to make and that we would ask for support for the decision through a referendum. We have no proposal with which to come forward; we do not propose that following the review there should be a change in the voting system for the House of Commons.

David Taylor: The Human Fertilisation and Embryology Bill contains a number of controversial clauses, including those on hybrid embryos, the deletion of the need for a father and new powers for the Human Fertilisation and Embryology Authority to apply the law in new cases without reference to ethical guidelines. The Bill has almost completed its passage in the House of Lords. Will the Leader of the House let us know whether it will come to this House before the Easter recess, so that we can plan our campaign? It is an important issue. A lot of people are making submissions to their MPs and they want to contact them at the appropriate time.

Harriet Harman: I know that the Bill will be subject in this House to a great deal of intense scrutiny and debate, as it has been in the House of Lords. I cannot give a specific time frame for when it will leave the House of Lords. Of course, the House of Lords needs to be allowed to complete its deliberations in as much time as it regards to be necessary.

George Young: What has happened to today's topical debate? Does the Leader of the House really believe that there is nothing to debate today apart from our salaries?

Harriet Harman: I am afraid that the right hon. Gentleman has hit the nail on the head. The topical issue for debate today is Members' pay.

Ian Cawsey: Will my right hon. and learned Friend find time for a debate on the importance of holocaust memorial day? I draw her attention to early-day motion 648, which has been signed by 145 hon. Members.
	 [ That this House notes Holocaust Memorial Day is 27th January, the day the Nazi death camp Auschwitz-Birkenau was liberated; recognises the significance of this day and the importance of remembering and learning from the past especially when there are those who seek to denigrate and deny its significance; observes that the lessons of the Holocaust have not been learnt and racism, anti-semitism and intolerance continue in the UK and abroad; further observes that the international community has failed to prevent the occurrence of genocide in Cambodia, Rwanda, Bosnia, Iraq and now Darfur; thanks the City of Liverpool for hosting the national event and the Holocaust Memorial Day Trust for organising the day; supports 2008's theme, Imagine, remember, reflect and react; applauds organisations like the Holocaust Educational Trust (HET) for their work and in particular recognises the impact the acclaimed HET visits to Auschwitz have had in shaping young minds; notes that a Book of Commitment will be placed in the corridor between the hon. Members' Cloakroom and hon. Members' Staircase between 1430 and 1630, Monday 21st to Wednesday 23rd January; and encourages all hon. Members to sign it and mark a day that helps to ensure the memory of the Holocaust is kept alive to serve as a warning now and in the future. ]
	The motion notes that memorial day is this Sunday and praises the work of the Holocaust Educational Trust. I thank my right hon. and learned Friend for using her good offices to allow the book of commitment to be placed in the House this week. It has been signed by many hon. Members of all parties. May I encourage hon. Members to attend local memorial events and to sign the early-day motion?

Harriet Harman: I shall take my hon. Friend's suggestion as a proposal for next week's topical debate. The need to remember and learn from the holocaust is raised regularly at business questions by hon. Members of all parties. The fact that Sunday is holocaust memorial day could make it an appropriate subject for next Thursday's topical debate.

William McCrea: There is no confidence in the Northern Ireland community that policing and justice will be devolved to the Northern Ireland Assembly—and certainly not in the lifetime of the present Assembly. In addition, there seems to be some confusion in the mind of the Secretary of State for Northern Ireland about the devolution of those powers. Will the Leader of the House therefore find time for a debate on that very important and topical subject?

Harriet Harman: I do not accept that there is confusion in the mind of my right hon. Friend the Secretary of State about that matter, but I shall draw the hon. Gentleman's comments to his attention. I shall ask my right hon. Friend to write to him, and to place a copy of the letter in the House of Commons Library.

Crispin Blunt: May we have a debate on the economy, to be led by the Prime Minister? That would give him an opportunity to explain why he said to my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) yesterday that he had
	"inherited a very difficult economic situation from him in 1997"—[ Official Report, 23 January 1997; Vol. 470, c. 1493.]
	How is that remark consistent with the fact that the economy at that time was moving into considerable surplus, with the best pensions provision in Europe, a savings ratio of more than 10 per cent., trade in balance and inflation under control at 2.5 per cent? Treasury officials described those figures as "fantastically good". How is that consistent with the description given by the Prime Minister yesterday?

Harriet Harman: The House has the opportunity every Wednesday to ask the Prime Minister questions about the economy. My right hon. Friend has shown that he is very willing to respond to such questions at length. He considers it to be of the utmost importance that our economy remains strong and stable, with high levels of employment and low inflation and interest rates, and that it stays strong against a background of international financial turbulence.

Nigel Evans: Harold Wilson was right to say that a week is a long time in politics. There are more important matters than MPs' pay, and the resignation of Ministers and the conduct of Government are among them. Does the right hon. and learned Lady agree that today's breaking news gives the Government an ideal opportunity to look again at the workings of government, and to decide that the responsibilities for Wales and for work and pensions—and indeed for Scotland and defence—should be split? Does not today's resignation news give the Government an ideal opportunity to carry out a mini-reshuffle?

Harriet Harman: The question of changes to the machinery of government is for the Prime Minister.

Andrew MacKay: In light of the breaking news, may we have an urgent statement today on the implications of the resignation of the Secretary of State for Work and Pensions?

Harriet Harman: I know that since I have been answering business questions today there have been media reports about the resignation of my right hon. Friend the Secretary of State for Work and Pensions, who also has responsibility for Wales. I do not have confirmation that his resignation has been received, but my right hon. Friend has worked to improve pensioners' retirement income and to ensure that more people come off benefits and go into work. That has been important work for people in this country, and I personally consider him to be an excellent colleague and a good friend.

Alan Reid: May we have a topical debate on the rules governing community bids to take over post offices? The Government's response to consultation on the post office network stated:
	"The Government wants to encourage more community-run post offices".
	Last Monday, I attended a meeting in my constituency, at which EnviroKirn, a local community group, said that it wanted to take over a post office that is threatened with closure. Post Office representatives were far from encouraging, however, and the rules that they set out made it appear almost impossible for a community group to take over a post office. It is clear that the Post Office is not following Government policy, so may we have an urgent debate on the subject?

Harriet Harman: I shall draw the hon. Gentleman's remarks to the attention of my right hon. Friend the Secretary of State for Business, Enterprise and Regulatory Reform. In the meantime, I suggest that he seeks a meeting with senior Post Office managers, so that he can present his constituents' concerns about services.

Mark Lancaster: May we have a debate on education so that we can discuss the Government's plans to impose thousands of new homes on Milton Keynes while at the same time slashing its education budget by some £64.5 million? What would the Leader of the House say to parents with children at Oakgrove school in my constituency? They face the prospect that the final phase of building will not be completed, with the result that pupils will have to leave and go elsewhere. Why exactly is Labour deserting Milton Keynes?

Harriet Harman: Labour is certainly not deserting Milton Keynes. I know that there is a demand across the country for more housing, especially among people who are finding it difficult to afford to get on to the housing ladder for the first time, or who are finding it hard to rent a good property for themselves and their families.

Mark Lancaster: What about schools?

Harriet Harman: The hon. Gentleman asked about homes, and I am dealing with that question first. As for education, there has been a big increase in investment in schools in this country, including in Milton Keynes, since this Government took office. The background at that time was that many children were being taught in very large classes, and problems with the roofs of many schools meant that buckets had to be put in place to collect the drips when it rained. The Government have instituted major programmes of capital and revenue investment in education, and I find it hard to believe that Milton Keynes is the only part of the country that has not benefited. Moreover, having made that investment in education, we intend to increase it in future.

Bob Spink: The public think that hon. Members are like children with the keys to the sweet shop, and they are astonished that we vote for our own pay rises. Will the Leader of the House programme proposals that our salaries be determined entirely by an independent body, so that we can get rid of that indecent practice before we go off for the summer recess?

Mr. Speaker: Order. That debate is coming. The hon. Gentleman must be patient.

Philip Hollobone: This week, the Public Accounts Committee published its findings that 40 per cent. of motorbikes on Britain's roads are not taxed, and that the Driver and Vehicle Licensing Agency has no effective way to ensure that owners of foreign vehicles who are in this country for more than six months pay our road tax. May we have an urgent debate in Government time on the millions of vehicles on Britain's roads that are both untaxed and uninsured?

Harriet Harman: The Government are considering the PAC report, and will respond in due course.

John Penrose: Earlier, my right hon. Friend the Member for Maidenhead (Mrs. May) asked the Leader of the House about the progress of the Government's ID card scheme, but may I press the right hon. and learned Lady to take her reply a little further? Her response was that the Government had always planned to phase in the cards, but the whole point about the question posed by my right hon. Friend was that that phased approach seems to be slipping. Does the Leader of the House agree that that slippage is adding fuel to the fires among Opposition Members, who have said that the scheme is unworkably complex and expensive and that it cannot work? Does not the fact that the scheme is delayed merely prove that point?

Harriet Harman: I am afraid that the hon. Gentleman cannot press me further on that, as I have nothing to add to what I said about 15 minutes ago.

Mark Pritchard: This year's budget deficit is already £44 billion, inflation—not calculated according to the retail prices index—is running at 11 per cent., and every household in the country has been lumbered with a second mortgage as a result of the Northern Rock saga. Is it not time, therefore, for an urgent debate on the Government's handling of the British economy, given that every household and business is paying more in tax?

Harriet Harman: I forbore repeating myself in response to the previous question from the hon. Member for Weston-super-Mare (John Penrose), but on this occasion I shall repeat what I said earlier in response to the shadow Leader of the House. The British economy is in a good position to weather the difficult storm arising from international financial turbulence. Opposition Members must think very carefully about whether it is really their job to talk down confidence in the British economy. We think that we remain in a strong position. The hon. Gentleman should support the high levels of employment in his constituency, and the endeavours of businesses there, by not misrepresenting the state of the economy.

Points of Order

Daniel Kawczynski: On a point of order, Mr. Speaker. On Monday, when the Foreign Secretary introduced the first stages of the ratification process for the EU constitution, he could refer to only two organisations that supported the Government's position on not giving the British people a referendum. He kept referring to one of them as the "commission of bishops". I left the Chamber thinking that English bishops were in favour of the Government's stance, but I subsequently found out that the group in question is the Commission of the Bishops' Conferences of the European Community, a pan-European group of bishops funded by the European Union. That is an absolute disgrace, and I urge the Foreign Secretary to—

Mr. Speaker: Order. That is not a point of order. The hon. Gentleman has to remember that there are many bishops and many bishops' organisations.

Simon Hughes: On a point of order, Mr. Speaker. The Leader of the House suggested that, according to the best advice that she had been given, there may have been a resignation by a Secretary of State. If that is the case, will the Secretary of State for Justice come to the House at a proper time next week to address us on matters relating to parties, pay and allowances?

Mr. Speaker: The hon. Gentleman is extending the statement on the business of the House. That is not a point of order.

BILL PRESENTED

Counter-Terrorism

Jacqui Smith, supported by the Prime Minister, Mr. Chancellor of the Exchequer, Secretary David Miliband, Mr. Secretary Straw, Mr. Secretary Hutton, Secretary Ruth Kelly, Mr. Secretary Woodward and Mr. Tony McNulty presented a Bill to confer further powers to gather and share information for counter-terrorism and other purposes; to make further provision about the detention and questioning of terrorist suspects and the prosecution and punishment of terrorist offences; to impose notification requirements on persons convicted of such offences; to amend the law relating to asset freezing proceedings under United Nations terrorism orders; to amend the law relating to inquests and inquiries; to amend the definition of 'terrorism'; to amend the enactments relating to terrorist offences, control orders and the forfeiture of terrorist cash; to provide for recovering the costs of policing at certain gas facilities; to amend provisions about the appointment of special advocates in Northern Ireland; and for connected purposes: And the same was read the First time; and ordered to be read a Second time on Friday 25 January, and to be printed. Explanatory notes to be printed. [Bill 63].

Members' Salaries, Pensions and Allowances

Mr. Speaker: Before we begin the debate, it may help the House if I indicate that there will be a single debate on the various motions in the name of the Leader of the House on salaries, pensions and allowances, and on all the amendments selected. A selection list has been placed in the No Lobby. The debate will take place on the motion about to be moved by the Leader of the House on "Members' Salaries (Expression of Opinion)". At 5 pm, if the debate has not concluded, I will call on the movers of any amendments selected to the first motion to move their amendments formally. I will then call subsequent motions and amendments, as necessary, which will be moved formally.

Harriet Harman: I beg to move,
	That, in the opinion of this House, the system for determining the salaries of Members of Parliament should be reviewed, in particular with a view to removing the need for final decisions on salaries to be subject to approval by this House; and that—
	(1) the yearly rate for salaries of Members of this House, including the additional salaries of chairmen of select and general committees, should be increased (in addition to the increase of 0.66 per cent. provided for in respect of the year starting with 1st April 2007 under the resolution of 10th July 1996 relating to Members' Salaries (No. 2))—
	(a) with effect from 1st April 2007, by 0.84 per cent. of the rate as it stood on 31st March 2007, and
	(b) with effect from 1st November 2007, by a further 1.06 per cent. of the rate as it stood on 31st March 2007;
	(2) from 31st March 2008, the resolution of 10th July 1996 relating to Members' Salaries (No. 2) should cease to have effect.

Mr. Speaker: With this we shall consider amendments (f), (g), (d) and (c) thereto, and the following motions:

Members' Salaries

That the following provision shall be made with respect to the salaries of Members of this House—
	(1) the yearly rate for salaries of Members of this House, including the additional salaries of chairmen of select and general committees, shall be increased (in addition to the increase of 0.66 per cent. provided for in respect of the year starting with 1st April 2007 under the resolution of 10th July 1996 relating to Members' Salaries (No. 2))—
	(a) with effect from 1st April 2007, by 0.84 per cent. of the rate as it stood on 31st March 2007, and
	(b) with effect from 1st November 2007, by a further 1.06 per cent. of the rate as it stood on 31st March 2007;
	(2) from 31st March 2008, the resolution of 10th July 1996 relating to Members' Salaries (No. 2) shall cease to have effect
	and amendment (a) thereto,

Parliamentary Pensions

That this House endorses in principle Recommendations 7, 8 and 9 of the report of the Review Body on Senior Salaries on parliamentary pay, pensions and allowances (Cm 7270-I) a copy of which was laid before this House on 16th January, relating to the Parliamentary Pension Scheme, and endorses the change to the Scheme rules outlined in Recommendation 6 if it can be implemented in conjunction with changes identified by the Trustees which produce sufficient offsetting savings to be cost neutral.
	and

Members' Allowances

That this House notes the recommendations made in Chapter 5 of the report of the Review Body on Senior Salaries on parliamentary pay, pensions and allowances (Cm 7270-I) a copy of which was laid before this House on 16th January; and is of the opinion that—
	(1) recommendations 20-22 relating to an increase in staffing allowance should be implemented, subject to the decisions of the Members Estimate Committee with regard to their timing and administration;
	(2) recommendations 17-19, 23-28, 30 and 31 (relating to reimbursement of unreceipted expenditure, audit, central funding of constituency office costs, Incidental Expenses Provision, partners' travel, Communications Allowance, Resettlement Grant, Winding-up Allowance, and nomenclature of allowances) be referred to the Members Estimate Committee for further consideration following consultation with the Advisory Panel on Members Allowances.
	and amendments (b) and (a) thereto.

Harriet Harman: Although the issue of MPs' pay, pension and allowances is a thorny one, I hope that there will be agreement across the House on at least four things: that MPs should be properly paid for the important work that they do; that MPs should be reimbursed for what they spend doing their job, as are people in any other line of work; that as MPs are paid from the public purse, we should show the same discipline in our pay increases as other public sector workers; and that, like everyone else, we should not decide on our own pay and should not vote on our pay increases.
	I am grateful to Sir John Baker and the Senior Salaries Review Body, whose report the Government published last Wednesday. With its 34 recommendations, it provides the context for today's debate. Let me deal first with the issue of allowances or, as the SSRB rightly calls it, parliamentary expenditure. The report makes a number of recommendations about parliamentary expenditure. They include proposals on expenditure on offices, communications expenditure and expenditure on travel.
	Many of the proposals raise complex issues, including the proposal for a central system for funding constituency offices and a corresponding reduction in the incidental expenses provision. We therefore propose that they should be referred for further detailed consideration to the Members Estimate Committee, which is chaired by Mr. Speaker and includes Members drawn from across the House. The Committee will have the advice of the advisory panel on members allowances. I am sure that the Members Estimate Committee will be interested to hear hon. Members' views on the SSRB's recommendations.
	There is one SSRB recommendation on Members' expenditure that I hope that the House can accept today: it suggests that given the big increase in casework that many hon. Members have experienced, staffing expenditure should be increased to allow for the payment of the equivalent of three and a half members of staff, up from three.
	On pensions, the SSRB proposes that the pension for future Prime Ministers and Lord Chancellors be no greater than the pension provision for Secretaries of State. The Government agree. Furthermore, the Prime Minister and the Lord Chancellor both agree that that should apply not only to future holders of their office but to them personally. On the SSRB proposals on pensions for future Speakers, as retired Speakers are not in the same position as retired Secretaries of State, we do not propose that the House change the pension arrangements for future Speakers.
	On severance pay, the SSRB makes recommendations to change severance pay for Ministers, so that if they are re-appointed to a salaried Government or parliamentary post within three months of leaving office—the period that is covered by severance pay provisions—they will be entitled to keep only a pro rata severance payment, and should return the rest. We accept that recommendation.
	I next turn to the question of MPs' pensions. The SSRB has proposed the introduction of a new optional one-sixtieth accrual rate. The Government accept that proposal in principle and are prepared to introduce it, if and when the change can be made as part of a cost-neutral package. The SSRB makes a number of recommendations on parliamentary pensions. They include a 50:50 sharing between Members and the Exchequer of future increases or decreases in pension cost pressures, and restricting the underlying Exchequer contribution to the scheme to a maximum of 20 per cent. of payroll. The SSRB also recommends that there be a review of parliamentary pension provision if the costs rise significantly, such that the 20 per cent. cap on the Exchequer contribution is likely to be breached.
	The recommendations are consistent with the approach being taken in public sector pension schemes generally. The Government propose that the detail of the arrangements be worked up in consultation with the trustees of the parliamentary pension scheme, chaired by the hon. Member for Bournemouth, West (Sir John Butterfill), to whom we all owe a debt of gratitude. Chairing the parliamentary pension scheme on behalf of all hon. Members and the House is unsung but important work. Once the detail has been worked up, any changes on pensions will have to be brought back to the House for decision.
	On MPs' pay, there are three issues that the Government have put before the House. First, this year—April 2007 to April 2008—we should not vote ourselves a pay increase that is higher than that for the rest of the public sector. Secondly, we should rescind the 1996 measure that instituted the mechanism for increasing MPs' pay in line with the average increase in pay bands in the senior civil service. Thirdly, in future we should not vote on our own pay increases at all; that should be decided on independently.

Richard Ottaway: On the point about rescinding the 1996 resolution, might it not be sensible to keep the measure in place until the Baker review and the Members Estimate Committee have reported? The 1996 resolution could be scrapped when the new recommendations are introduced.

Harriet Harman: It is really an earnest of our good intent that we propose to scrap the existing mechanism, but we do not expect the current situation to drift on; we expect there to be a new comparator and a new mechanism. The review is due to report to the Prime Minister in May. The issue will be back before the House before the recess, and there will be an opportunity for the House to decide. Our concern is that we should clear the decks now, at this vote, showing the House's intention that we move forward to a different system. If we leave the current system in place, it can always continue. We should make the decision on April 2007-08 pay, but in future we will do it differently, with a comparator and a new mechanism. That is what we are asking the House to decide on.
	There are amendments on that point, and I shall address them in more detail later in my speech. I will take interventions, and I do not mean not to answer hon. Members' questions, but may I deal first with what the Government propose and the Government's response on the amendments? If there are any points that hon. Members wish to take up or which they are not clear about, I shall take them at the end. Perhaps we can proceed on that basis.
	Since 1996, MPs' pay has been increased in line with the average of the increases to the maxima and the minima of the pay bands in the senior civil service. Over the past two years, this has meant that MPs have had below-inflation pay increases—2.2 per cent. in 2003, 2 per cent. in 2004, 2.8 per cent. in 2005, 2 per cent. in 2006, which was staged, and this year 0.66 per cent. The question of our pay increase for 2007-08 needs to be seen against that background, and also against the background of our strong commitment to our public services and those who work in them; in the context of our determination to sustain a strong and growing economy that can withstand global financial turbulence; and alongside the approach to pay that the Government are taking for the public sector as a whole. We ask the House, in the motions that are before it, to stage the 2.56 per cent. recommendation made by the SSRB and which we accept, but to stage that increase so that it amounts to 1.9 per cent. in value across this year.
	For the same reasons that I have just set out, we do not accept the SSRB proposal that Ministers' pay should increase faster than that of other hon. Members. For future years, we propose that we do not have votes on our own pay again. The public find it unacceptable, we know that it is inappropriate, and some other legislatures in parliamentary democracies are able to do it differently. For example, MPs in New Zealand do not vote on their own pay increases.

John Maples: The right hon. and learned Lady and I have been in the House a long time. In the past, we have set links, but the problem is that when that link produces a reasonable pay increase, the Government say, "We can't afford it and it blows a hole in public sector pay policy." Whatever the mechanism, we have ultimate responsibility for our pay increases. If we create a link and the result is that we get, say, a 3 per cent. pay rise, will the Government say that that is too much in the context of public sector pay? Unless we are prepared to implement whatever the link results in, we end up with the problem of having to vote on our own pay.

Harriet Harman: On these matters, the House is sovereign. It is possible for the House to decide on a framework, with primary legislation if necessary, to set the arrangements for making those decisions in future. The question is what mechanism would be appropriate, and what degree of independence would be appropriate. Of course, the House can always revisit any primary legislation and change it, but we are asking Sir John Baker to produce a proposal that sets up a comparator and a mechanism so that we will not have to vote on our pay in future.

Martin Salter: So that the Leader of the House hears the same argument from both sides of the House, may I point out that there is a deal that can be struck? Does she agree that it is right and proper that we are no longer in the invidious position of having to vote for our own pay rises—even the massive pay increase of 0.6 per cent. for which the media gave us great credit last year? The other side of the deal that we need to hear is that the Government will keep their paws off the recommendation of any independent review. We need to hear from all those on the Front Benches that it is the intention of the House to move forward on the New Zealand and Australian systems, which link pay to a registered scale and take the politics out of the situation.

Harriet Harman: Hon. Members will have seen the terms of reference that the Government set out for Sir John Baker, and it is precisely to identify proposals that would put into practice the sentiments expressed by my hon. Friend that we have asked Sir John to conduct that review and report to the House.

Several hon. Members: rose —

Harriet Harman: I will, if I may, press on with my speech. I know that many hon. Members want to catch Mr. Speaker's eye. All interventions are on the same points, and I will deal quickly with as many as I can at the end of my speech.
	I am grateful to Sir John Baker for agreeing to the Prime Minister's request that he will review the way other countries deal with the matter, look at our constitutional position and legal framework, and make proposals that I will bring back to the House for us to debate and vote on before the House rises for the summer recess. I know that colleagues are concerned about the timing of the publication of the Baker review and any consequential votes. I will ensure that the report is published at the earliest opportunity. If the House agrees to this approach, I will return to the House before the summer recess with proposals for a way forward.

Theresa May: Will the right hon. and learned Lady comment on the concern that a number of Members feel that a review that is taking place by the man who headed up the SSRB is not the independent review that Members would like, and not the fresh thinking in this area that would have been brought about by bringing in somebody else? Can she explain why the Government turned to Sir John Baker to hold the review?

Harriet Harman: Sir John Baker is entirely independent. He also has a great deal of experience, and if any fresh thinking is needed, I know that, as part of his review, Sir John would look forward to receiving it.
	Let me assure the House that the terms of reference for the Baker review are designed to focus on identifying a pay comparator, coupled with a mechanism for setting pay, should that comparator become non-viable in the future. The review is not invited to propose structural changes to the parliamentary pension scheme.

John Spellar: It is extremely important that we are clear on the timetable for the review. It is the view on both sides of the House and also in the Government that the issue should be finally resolved before we rise for the summer recess. That will require the report to be published preferably by the end of May, and at the latest by the middle of June. The House is looking for an assurance, or even a guarantee, that it will be published, debated and voted on before we rise for the summer recess.

Harriet Harman: That is what we have said. My right hon. Friend is right. We need a clear timetable, not least because today we are asking the House only to vote on our pay increase for April 2007-08. We will therefore need a new comparator and a new mechanism. We have asked Sir John to report to the Prime Minister in enough time to enable the Government to consider the report and hon. Members to consider the report, debate it and make a decision before the House rises in the summer. I accept my right hon. Friend's point.

Several hon. Members: rose —

Harriet Harman: I turn to the amendments. I want to set out their effect and the Government's response, but first I will give way.

Michael Spicer: Has Sir John Baker accepted a specific timetable? If so, what are the dates?

Harriet Harman: Sir John Baker has kindly agreed to do the work on this important review to the timetable outlined to him by the Prime Minister—as far as possible to complete the report by the end of May or the beginning of June.

Bob Spink: Why should not the proposals of the Members Estimate Committee be brought to the House in parallel with Sir John's report so that hon. Members can decide which is the best system for the House?

Harriet Harman: It is within the remit of the Members Estimate Committee to deliberate on any comparator for Members' pay and any mechanism for setting it in the future. However, to avoid having two identical twin-track reviews and a duplication of effort, and bearing in mind that hon. Members would want to give evidence and outside bodies would be expected to be consulted as part of the process and they would not want to give evidence to two identical parallel inquiries, the most advisable way to proceed would be for the Members Estimate Committee to consider the matter and to present a memorandum to Sir John Baker's review. The view of the Members Estimate Committee would then be clear to the House and the two systems would be working coherently. That is a matter for the Members Estimate Committee, which, as the House will know, is chaired by Mr. Speaker.

Don Touhig: I was fairly clear about the timetable until a moment ago when my right hon. and learned Friend said that the report would be completed "as far as possible". Can we be clear that it will definitely be completed by June and debated and voted upon—not as far as possible, but the whole report?

Harriet Harman: The Government's clear intention is that we should come back to the House with any proposals for change that arise from the Baker review before we rise for the summer. That is the timetable that we have set forth. I know that there is criticism about the time that the Government took to publish the SSRB report and to bring it to the House for debate, so I understand the worry that the timetable might slip. That is one reason why we have made it absolutely clear, by proposing that we abolish the 1996 mechanism, that we are determined to have change and that we have a clear timetable for that change, which will be in the hands of the House and which the House will vote on before it rises for the summer.

David Maclean: rose—

Harriet Harman: I give way to the right hon. Gentleman, who is a member of the Members Estimate Committee.

David Maclean: The right hon. and learned Lady and I have the privilege of serving together on the Members Estimate Committee, which is the House of Commons Commission wearing another hat. I am not convinced by her argument that it would be too time consuming or unnecessary duplication if the Members Estimate Committee was given the authority to carry out a review, admittedly in parallel, but possibly talking to different people and involving different experts in the House from those to whom Sir John may have access. I do not propose that we set ourselves limited terms of reference; we would have the power to range far and wide. The right hon. and learned Lady is right. The Members Estimate Committee could do this in any case. My amendment merely seeks to give it slightly more moral authority and a guarantee that whatever we produce will be debated in the House. If my amendment is passed, we would have the right to bring our review forward for colleagues' consideration. If not, we could publish many memorandums until we were blue in the face but we would have no automatic right to have them discussed.

Harriet Harman: There will be an opportunity for hon. Members to consider Sir John Baker's proposals and the Government's response, and any proposals of, or conclusions reached by, the Members Estimate Committee. I just want to be sure that we do not set forth today on a twin-track and duplicated exercise. The Members Estimate Committee will undoubtedly be important in this exercise, because it comprises senior and experienced Members, such as the right hon. Gentleman.

John Bercow: And of distinction.

Harriet Harman: The Committee is made up of Members of exceptional distinction and is drawn from those on both sides of the House. Of course it makes sense for that Committee to give all the help that it possibly can, based on its wisdom and experience, to the John Baker review, but I do not want to duplicate the Baker review. It is right that we have an independent element in the review as to how we should, for the future, set our pay independently. The Members Estimate Committee will have a big contribution to make to the review and hon. Members will expect it to do so, but I do not ask the House to support the right hon. Gentleman's amendment because it would result in duplication.

Peter Luff: I am confident that Sir John Baker would like to produce an independent and good report that would inform the House. It may be absolutely perfect, but there is considerable speculation that early drafts of the SSRB report were provided to Downing street and sent back, not once but twice, so there are doubts about the independence of the process. May we have guarantees, please, about the independence of this particular process?

Harriet Harman: We expect the process in future to be independent. How we change from the current system of the SSRB to a future system will be a matter for the House to consider when we vote on the matter before the House rises for the summer. The hon. Gentleman makes an important point about independence and he can make proposals on that for the review.

Chris Mullin: rose—

Harriet Harman: I will make this the last intervention for the time being. Some years ago my hon. Friend proposed that we should have an independent pay-setting system, which was rejected by the Government. Had we accepted his proposal, we might not be in the situation that we are in today. As he had such foresight, I will allow him to intervene now.

Chris Mullin: My right hon. and learned Friend is very kind. Is it not desirable that, whatever formula the Baker review comes up with, it is comprehensible to the outside world? One reason why we have got into such difficulties in the past is that we have come up with arcane formulae, usually linking us to civil service grades that have eventually been abolished, as a result of which we have found ourselves back in the same old situation. When she talks to Sir John Baker, will she invite him to link our fortunes with those of some of our humbler constituents so that the outside world can understand his recommendations?

Harriet Harman: There are two problems with the current linkage. First, it was incomprehensible to the outside world. No hon. Member could easily explain it to their constituents. Secondly, we had no independent mechanism for dealing with a situation in which a comparator became non-viable, and we were linked to a civil service pay structure that changed, so while civil service pay went up, our pay went down, which is obviously unacceptable.
	Amendment (c) in the name of the right hon. Member for Penrith and The Border (David Maclean) suggests that the Members Estimate Committee should be asked to bring forward proposals for having salaries determined by an independent body appointed by the House. Clearly, those would be worthy of consideration, and I know that Sir John Baker will be happy to receive submissions from Members. I hope that hon. Members will accept that we should await the outcome of Sir John Baker's review before deciding on the future comparator and the mechanism for MPs' pay. I assure the House that the terms of reference for the Baker review are designed to focus on identifying a comparator coupled with a mechanism should that comparator become non-viable. It is not invited to propose structural changes to the parliamentary pension scheme.

David Maclean: rose—

Harriet Harman: I hope I do not regret this, but I will give way one last time.

David Maclean: I am very grateful to the right hon. and learned Lady, who has been exceptionally courteous.
	If we on the Members Estimate Committee can be trusted with the enormous task of sorting out some of the allowances anomalies identified in Sir John Baker's report, why can we not be given—legally, or with the approval of the House—the official task of coming forward with proposals on pay and linkage? I do not mean a full-scale review. We could use the experts at the House of Commons Library and the Fees Office, and the director of resources, and we could get a lot of input from colleagues. Given that we are trusted to sort out the allowances, why can we not make such proposals?

Harriet Harman: Members' remuneration—our pay—is different from the reimbursement of expenditure. As far as ensuring public confidence in how we go forward is concerned, it is right that the Prime Minister has asked for there to be an independent external review. Of course, the Members Estimate Committee can decide what it does; of course it can decide to consider the issue mentioned by the right hon. Gentleman and propose a memorandum to the Sir John Baker review. It does not need a resolution of the House for that; under the leadership of Mr. Speaker, the Committee can do what it sees fit. However, I urge the House against mandating the Committee to carry out an exactly parallel review to the one that the Government resolution asks to be done independently.
	Amendment (f), in the name of the hon. Member for North Devon (Nick Harvey), would have the effect of implementing SSRB recommendations 2 and 3, so that MPs' pay would be uprated for 2008-09 onwards by the increase in base pay of the senior civil service and MPs would receive a £650 supplement for 2008-09, with the proviso that the award would be staged to ensure that MPs' pay for 2008-09 increased by only 1.9 per cent.
	Amendments (g), in the name of the hon. Member for North Southwark and Bermondsey (Simon Hughes), and (d) in the name of the hon. Member for Christchurch (Mr. Chope), would both leave the current system in place. In the case of amendment (g), that would be until such time as a new system had been agreed. I have already outlined the Government's reasons for not accepting the SSRB's proposals on Members' pay. However, we are seeking to rescind the existing arrangements so that we clear the decks and the House can resolve the issues as soon as possible and before the summer recess.
	Incidentally, the 1.9 per cent. proposed for 2008-09 in amendment (f) would extend the 1.9 per cent. that we ask the House to accept for April 2007-08 until April 2008-09. That is not what the Government propose for the rest of the public sector. I hope that the hon. Members who have tabled the amendments will withdraw them; if they do not, I ask the House to vote against them.
	I turn to amendment (a), on Members' allowances, in the name of the hon. Member for Cities of London and Westminster (Mr. Field). He has proposed that the Members Estimate Committee look into recommendation 29 of the SSRB report which suggests an immediate increase in the London supplement from £2,812 to £3,500; henceforth, he also proposes that it should be adjusted in line with the public sector average earnings index. I realise that the hon. Gentleman has a long-standing concern over the issue and that he submitted evidence to the SSRB on that point. However, the Government reject the proposal because the London supplement is not, like other allowances, a reimbursement for costs—it is part of taxable income.
	I turn to amendment (b) on Members' allowances, tabled by the hon. Member for North Southwark and Bermondsey. Although we support the intention—namely, that the increases in staffing allowance should take effect from 1 April this year—and although I think I can say that that would already be the broad intention of the Members Estimate Committee, it is difficult to be certain at this point that all the necessary systems would be in place by then. It therefore might be wiser not to specify a date. However, the intention of the amendment is accepted: 1 April for the start of the increase for the salaries of Members' staff.
	I hope that the House will support the Government's position on this year's pay. It keeps us within the pay discipline that has applied to others in the public sector. I also hope that the House will agree that we should finally put an end to the inappropriate practice of MPs voting for their own pay.

Theresa May: I cannot say that I relish speaking in this debate; like many right hon. and hon. Members—and, it would now seem, the Government—I believe that there has to be a better way to determine the pay of Members of Parliament. However, we are where we are. Whatever the proposals for the future, we must address the proposals brought forward by the Government on the back of the SSRB report.
	First, I want to comment on the Government's handling of the report; that has been raised in interventions by a number of right hon. and hon. Members, and it informs us about the Government's attitude to the issue. That is part of the reason why right hon. and hon. Members are concerned about the Government's unwillingness to give an absolute guarantee that decisions on the new mechanism will be taken before the summer recess. The Government sat on the report for a considerable period. Indeed, I almost felt for the Leader of the House when in business questions every week she kept being asked when the report was coming forward. Each week, she tried to find different language—"shortly", "very shortly" and "imminently". She was desperately trying to find a way of explaining what was happening.
	Then there was a farcical situation; the reason given for not publishing the report for Members— [Interruption.] My hon. Friend the Member for Buckingham (John Bercow) anticipates what I am about to say. We knew that the Leader of the Opposition and the leader of the Liberal Democrats had received copies and believed that certain others had also received some, yet we were told that Members could not have copies because they had not been printed. That announcement was met with howls of derision, and that showed how poor the response had been.
	The issue was not only about Government dithering; crucially, while they were sitting on the report and not allowing Members to see it, they were leaking details to the press. The Prime Minister went on the BBC to explain the Government's position and what he wanted MPs to vote on, yet we had never seen the report. The whole thing was a farce, and it is against that background that a number of interventions have been made on the Leader of the House about expectations about the Government's intentions for the introduction of the new system.
	I support the Government's desire to introduce a new system; indeed, my right hon. Friend the Leader of the Opposition called for one some time ago. However, we need to be clear that the Government will bring it in before the summer recess—that should be an absolute, rather than the Government's intention. The Leader of the House determines the business before the House, and it is up to her to say whether that debate will take place before the summer recess.

Simon Hughes: The right hon. Lady is right to be critical of the process since the report was handed to the Government six months ago in July; there have been leaks since then. If her party is in future responsible for receiving any reports—

Harriet Harman: If it ever is.

Simon Hughes: If her party is in future responsible for receiving any reports from any independent body—on pay, staffing or anything to do with this building—will she undertake that they will be published at the same time as they are received? In that way, they could be simultaneously available to the Government of the day and the public and there could be proper and equal consideration. Such an undertaking would be welcome; we would bank it for an eventual sunny, or rainy, day.

Theresa May: I refer the hon. Gentleman to the sedentary intervention from the Leader of the House. I hope and expect that in future the system will be such that there will be no question of the Government receiving some report and being able to sit on it for a considerable period. In future, I hope that such a process will be independent. That is what we should all strive for in respect of the future determination of MPs' pay.

Martin Salter: To avoid the right hon. Lady falling foul of her own charge of dithering, will she take this opportunity to make it clear that should she be in the happy position of becoming Leader of the House at some point in the distant future, it would be her intention to honour the independence of the review body and keep her sticky hands off any recommendation that came forward in respect of Members' pay or allowances?

Theresa May: I am happy to say to the hon. Gentleman that it is my intention that this House finds a way of determining Members of Parliament's pay that does not require the current process whereby we all have to vote on our own pay. There should be some way of doing that without the need for debate. I will therefore be supporting the Government's proposals on the review.

Several hon. Members: rose —

Theresa May: I give way to my hon. Friend the Member for Stratford-on-Avon (Mr. Maples).

John Maples: As regards my right hon. Friend's continuing double act with the hon. Member for Reading, West (Martin Salter), the point is not whether we have an independent mechanism for recommending pay but whether the recommendation is implemented. When we have had recommendations from independent mechanisms in the past, the Government have tended to say, "That's too much—we're going to whip our Front Benchers to vote against it", and that is the end of it. What we want from both sides is an undertaking that if such a mechanism is established—I think that most of us are in favour of that—the Government do not interfere to try to prevent a recommendation from being put into effect.

Theresa May: My right hon. Friend describes what has happened in the past, notably the Government whipping Front Benchers to vote against proposals. The whole point of the current review is to find a mechanism by which Members of Parliament's pay can be determined without the requirement for a vote in the House of Commons.

John Bercow: rose—

Theresa May: I will give way one more time.

John Bercow: I am exceptionally grateful to my right hon. Friend, who has been generous in giving way.
	I am gravely concerned by my right hon. Friend's replies to my hon. Friend the Member for Stratford-on-Avon (Mr. Maples) and the hon. Member for Reading, West (Martin Salter). What I want to be clear about is this: does she believe that there should be an automaticity about this process so that when the independent recommendation is made it immediately comes into effect? Surely the Government's position is that they are in favour of an independent recommendation as long as the proposed figure is low but not if it is high.

Theresa May: That is certainly my hon. Friend's interpretation of the remit that has been given to the review body. I ask him to wait and see what proposals the review puts forward on the mechanism that is to be set up. My aim, and that of the Leader of the House, the Government, my right hon. Friend the Leader of the Opposition, and, I hope, other Members of this House is to find some mechanism that avoids Members of Parliament being asked to vote on their pay and which enables MPs' pay to be determined separately from the political environment within the House of Commons.
	I should like to comment on a couple of the principles that the SSRB report sets out on MPs' pay, on which I hope that everybody would agree. It says:
	"Pay should not be so low as to deter suitable candidates, or so high as to make pay the primary attraction of the job".
	I hope that we can all agree that that should indeed be the aim, whatever the mechanism. None of us wants people from different walks of life—nowadays, that includes people working in public sector jobs such as the head teacher of a secondary school—to be deterred from becoming a Member of Parliament because of the pay differential. Similarly, the SSRB makes several references to the fact that although there are of course always large numbers of people wanting to become Members of Parliament, pay should not be set at a level at which it attracts people to the job. People should want to do this job for other reasons than simply the pay level.

Michael Jabez Foster: rose—

Andrew MacKinlay: rose—

Theresa May: I have been very generous, but I will give way one more time to the hon. Member for Thurrock (Andrew Mackinlay).

Andrew MacKinlay: I am listening carefully to what the right hon. Lady is saying about MPs' pay. Another part of the background to this is the disproportionately high salaries for Ministers and something that has disfigured this House and will continue to do so—the growing disparity in pay even between Back Benchers, with people on an extra £15,000 a year for chairing Select Committees and Public Bill Committees. How many of us are still on basic pay? That pay difference is very threatening, and it diminishes the number of principled resignations by Ministers. In the longer term, there should be a greater closeness between the salaries of Back Benchers, who do a lot of difficult work, and Ministers. I never thought that I would be guilty of avarice, but I am.

Theresa May: I would make two comments in response to the hon. Gentleman. First, I support the alternative career structure of Committee Chairmen, because it means that Members of Parliament are able to get on and able to do more than just the job of being an MP without having to curry favour with their Front Benchers to get on to the Front Bench. It is right that the House has that separate career structure. Secondly, as for how many MPs are on the basic pay rate, I can tell him that, with the exception of one or two, members of the shadow Cabinet are certainly on that basic pay rate.

Michael Jabez Foster: Will the right hon. Lady give way?

Theresa May: No—I said that I would take one more intervention, and I am going to make some more progress.
	The SSRB says that House of Commons expenses, or allowances, as they have come to be known over the years—different terminology is used—

Michael Jabez Foster: rose—

Theresa May: I have told the hon. Gentleman that I am not giving way.
	The SSRB says that most of what are known as allowances for MPs
	"are in fact mechanisms for the reimbursement of expenditure actually and necessarily incurred by MPs in order to do their jobs."
	I will return to that important statement in a few minutes.
	I am going to take my life in my hands and make some comment about the media's approach to MPs' pay.

David Maclean: Will my right hon. Friend give way?

Theresa May: If my right hon. Friend will allow me, I have said that I want to make some progress. I am sure that he will be able to find a suitable opportunity to intervene later on.

John Spellar: On a point of order, Mr. Speaker. Could you, to aid the House, give an indication of how many hon. Members have said that they want to speak and whether that means that we are short of time, which I accept is a constraint on the right hon. Lady in taking interventions?

Mr. Speaker: That is not a matter that I will go into.

Theresa May: As for the Government's motions, let me first say that I will indeed support the Government's proposal on pay. Although it does not follow the recommendations of the SSRB, which set out the reasons for its recommendations, I believe that at a time when others in the public sector are having restraint forced on them in terms of their pay, Members should also show restraint and should not use the fact that we can vote on our own pay to vote ourselves a higher increase than the Government propose in line with that restraint. I would urge right hon. and hon. Members to exercise similar restraint and support the Government's proposal.
	Similarly, I will support the proposals on pension arrangements. The SSRB has come forward with an attempt at a solution on the issue of retained benefits, which offers a way out for colleagues whose contribution rate exceeds what is necessary to achieve the pension available given their retained benefits. It is important that that is looked at, albeit that the Government motion asks for that to be done in a cost-neutral way. I think that there is merit in the proposals put forward by the Conservative party's democracy taskforce, chaired by my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke), to consider different pension arrangements in future, after the next election. We need to be very wary and aware of the circumstances in which many people in the private sector find themselves in terms of their pension arrangements.
	As I said, I welcome the Government's intention to find another way to set MPs' pay. However, I would say to the Leader of the House that, although it would not be right to question the independence of Sir John Baker, I question the fact that he is undertaking this review given that, in the past, he has referred to the issue and given some hints as to what he thinks might happen. Surely the task should be done by somebody who comes to the issue with a fresh face and fresh thinking.
	The Leader of the House made a number of references to a comparator, and a mechanism if the comparator no longer appears to be valid. It is up to the review to decide what the mechanism for choosing MPs' pay should be, and it may be that that does not involve a comparator. The Government should give the review the ability to undertake wide-ranging thinking on the issue. On that point, I support the proposal of my right hon. Friend the Member for Penrith and The Border (David Maclean) that the House should undertake a review through the Members Estimate Committee because there will be value in the House having a range of proposals that it can look at when the time comes; it is perfectly valid for the House to already have done some thinking on the matter.
	I want to comment on why the issue of whether MPs vote on their pay has resonated so much with the public, and sadly, it is because many voters no longer trust politicians. They have a jaundiced view of politicians and are consistently given the view by the media that all MPs have their snouts in the trough. That is a disappointing representation on the part of the media because it damages this House, politics and our parliamentary democracy if people feel that they are not able to trust politicians. There are, of course, other ways in which trust in politicians is damaged, such as Governments not delivering on their promises, and other factors, but we should be concerned about the image of MPs portrayed by the media.

Nigel Evans: My right hon. Friend probably did not hear, but someone on our Back Benches suggested that our pay should perhaps be linked to that of Jeremy Paxman. Does she think that that is a goer?

Theresa May: I suspect that that would blast through the Government's pay policy in no uncertain terms. I am tempted to say that it would be better if I did not refer in this House to any sort of support for Jeremy Paxman, given what he has said recently.
	The way in which MPs' pay is reported in the press is an important issue. We consistently see the misreporting of the amounts of money that MPs "earn" in this House by the addition to our basic salaries of the budgets that we have to pay for our staff and in order to run our offices. Indeed, only last week  The Daily Telegraph set out a table that included average staff salaries and average expenditure on offices alongside average travel expenses and the average additional costs allowance, under the heading "MPs' Gravy Train".
	We must find a way to get away from that image, so that people understand the difference between pay that a MP receives, in the way any other employed person receives a salary or wage, and the money necessary for us to do our job for our constituents. The SSRB has proposed a change in terminology. This issue is important, and I support the proposal that the MEC should consider the arrangements for allowances. This matter is one that the MEC should take on board when it considers the SSRB's specific proposals on allowances.

Michael Jabez Foster: With regard to perception, is not another problem the substantial incomes that some Members—not most—receive from outside the House? She mentioned career development in the House, and that is great, but surely career development outside the House is something different. Should we not have a system where there is a relatively generous allowance from the House, less whatever income is derived from outside?

Theresa May: I will say only this to the hon. Gentleman: I have always taken the view that my job as a Member of Parliament is a full-time one. I choose to undertake my role in that way in order to give my constituents the attention that I feel I should.
	The Leader of the House did not refer to allowances apart from the increase in the staffing allowance, which I also support. However, she made no other reference to the SSRB proposals on allowances. In a sense, it was right that she did not, because the matter is being referred to the MEC, but I wanted to comment on it. I know that it is difficult—we are all different Members with different sorts of constituency, and our experience is different. It is difficult to use the experience of just one Member to look at the issue, but I wonder to what extent the SSRB understands the issues relating to allowances.
	It is important for the MEC to consider carefully the implications of the proposals. For example, on the issue of incidental expenses provision and office accommodation, I can see the SSRB's argument that Members who keep staff in the House effectively get rent-free accommodation, whereas Members who have staff in constituency offices have to pay the rent for those offices. It says that it will attempt to balance that situation out, but it also proposes penalising MPs who have staff on the House estate. That will not create a level playing field. Moreover, the SSRB talks about an average rent probably being about £6,000 a year, and says how it should be possible to use that sum to rent an office of 800 sq ft. I had a very quick look at the website of one estate agent in Maidenhead yesterday and discovered that a 600 sq ft office would cost £12,000 per annum, not £6,000. The MEC has to consider that issue carefully.

Tony Wright: I agree with almost all that the right hon. Lady is saying, but there is concern about allowances, some well judged, some ill-judged. If we are saying that there should be an independent procedure for determining salaries, surely there should be some independent element in the consideration of allowances.

Theresa May: I have some fairly fixed views on allowances and what should happen to them. I would prefer to see the additional costs allowance abolished and made part of salary so that Members could make decisions. There are lots of issues related to that concerning what is taxable and the impact on pensions, but we should make some significant changes to allowances. I want to make two more brief points; I am conscious that a number of hon. Members want to speak in the debate.

Desmond Swayne: That's right.

Theresa May: I am grateful to my hon. Friend for that.
	The SSRB made a proposal relating to the audit of allowances, which I assume will be part of the MEC's consideration of such matters. I chair the House of Commons Audit Committee, and the House must consider that issue seriously. I am not sure that the SSRB's proposal is necessarily the right way forward, but the MEC will need to look at it and consider it carefully. On resettlement grants, the SSRB does not quite understand what is likely to happen if such grants are not suddenly made available to hon. Members who retire, or resign from their seats. Willie Hamilton is the name that comes to mind—the individual who stood for a seat that he was not going to get in order to qualify for a grant. The SSRB has perhaps not quite understood the full implications of what they are proposing.
	I support the Government's proposals on pay restraint, and I encourage other Members to do so. Albeit with concerns about Sir John Baker doing it, I support the concept of a review to find another mechanism for determining MPs' pay, but there is value in the amendment of my right hon. Friend the Member for Penrith and The Border, suggesting that the House should consider that issue as well. This is an opportunity for us to change the approach taken to how we deal with our pay and the view that the public have of MPs. I hope that all hon. and right hon. Members will grasp that opportunity and, in due course, make changes that enable us to present a better image, with, I hope, the assistance of the media through their accurate reporting on what is done with regard to MPs' pay and budgets.

Tony Lloyd: Let me begin where the right hon. Member for Maidenhead (Mrs. May) ended, with an exhortation to the media. I have no great hopes of ever winning the battle with the media, but it is nevertheless right and proper to establish a process in which the public have confidence. The public view of how we are paid is not the same as the media's. Re-engaging with and retaining the confidence of the public matters to every Member of Parliament.
	I speak as chair of the parliamentary Labour party. I have no doubt that some colleagues will dissent from what I am about say, but I know that hon. Members of all parties feel that we need to move forward in the spirit of the motion that the Leader of the House has tabled. I congratulate her, because she has put a great deal of effort into listening to the range of views that have been expressed, especially those in the parliamentary Labour party. She has devised a package that we can support. Obviously, there are matters of emphasis that we need to get right today to ensure that when the matter reverts to the House in the middle of the year, we get everything right for the future.
	There appears to be general agreement that it is right and proper for the Members Estimate Committee to consider allowances. It is important to establish the fact in the public mind that allowances are not Members' pay. Members spend money in the course of their professional lives and reclaim it as expenses, as happens in many other walks of life. The Members Estimate Committee should consider the matter properly, and we should not simply be forced to go on the defensive because external bodies make representations about it. The reference to the Members Estimate Committee is right, with the exception that the Leader of the House made—again, it has general support—that we should increase the number of full-time equivalent staff to 3.5.
	Those of us who met members of the police force yesterday, and those of us who represent public sector workers—indeed, all hon. Members—know that MPs racing against the Government's public sector pay policy would be viewed with concern. Hon. Members in different parties may have different views on the validity of pay policy. However, we, as Members of Parliament who can set our salary today, must recognise that the public have views on public sector pay. We are, in a sense, bound by that. The 1.9 per cent. annual pay increase, leading to the 2.56 per cent. year on year increase, is right and proper and we should accept it.

Anne Main: Like me, the hon. Gentleman met members of the police yesterday. Many hon. Members are concerned about altering the pay structure, though I support breaking the ability to vote on our pay. The police reached an agreement in arbitration, but then it was changed—and it is that breach of trust that colours many hon. Members' views today. We are worried that putting one system into abeyance but not replacing it could lead us down a dangerous path.

Tony Lloyd: I shall leave the hon. Lady to discuss police pay on another occasion. On our pay, the public should have confidence in what we do. Members of Parliament should also have confidence in the process, and I want to consider the new mechanism shortly. However, for this year, it is right to keep within the guidelines that the Leader of the House has proposed, which exist for others in the public sector.

Mark Field: The hon. Gentleman's comments are rather perverse. We criticise Government actions on the police—a no-strike deal was an integral part of an arbitration process—but we are now almost trying to make two wrongs into a right by ignoring the independent board's recommendations on our salaries. Surely we should defend the notion of implementing the findings of an independent board properly, rather than simply grandstanding on police pay.

Tony Lloyd: I do not know who is grandstanding. The hon. Gentleman may be the one who needs to explain to his constituents that there are two wrongs. I presume from that that he would like to push his pay above the public sector norm. That is for him to discuss with his constituents. I shall simply deal with the specific issue of our pay.
	The genuine action is the request to Sir John Baker to institute a review for the long term. The important points have already been established in exchanges in the House. I hope that the Leader of the House will take on board the legitimate concerns that have been expressed about the timetable, and about independence. I know from my conversations with her that she believes those matters to be of the utmost importance.
	The timetable matters, because if it were to slip and the process lasted beyond the summer, all hon. Members would be unhappy. That would echo the delays in the publication of the SSRB report, and that is unacceptable. It would be equally unacceptable if there were no adequate timetable for consultation with hon. Members and consideration of Sir John Baker's recommendations. We need to examine the details and ascertain whether they achieve what we all want.
	We must ensure that genuine independence emerges from the process. Independence is a two-way street. Independent recommendations have been mentioned. We are not seeking independent recommendations but an independent mechanism; there is an important distinction between them. We need a mechanism that we believe to be independent and that we respect as being independent of Members of Parliament. It must also be independent of Government. Those of us who have been in the House under Governments of different complexions know that the heavy hand of—I shall not name individual Ministers, so let us say that it is the heavy hand of the Treasury that bears down on us. The mechanism should be independent of Members of Parliament, the Government and the Treasury. That is the prize that we must seek. In the past, I believed that I had voted for that independence—which was then, alas, snatched from us. We must ensure that we now establish genuine independence, which will not be subject to pressure from any side.

Michael Spicer: Has the hon. Gentleman been told when the mechanism will be used? We have not been told that yet.

Tony Lloyd: I am not sure where the ambiguity lies. The Leader of the House made it clear that Sir John Baker will be asked to report specifically on the mechanism, which will begin to have an impact from 2010-11 onwards. I believe that that is the precise timetable—but perhaps I am missing the point. That is my understanding, but others may say that it is defective. My right hon. and learned Friend the Leader of the House is not attempting to dissent from my interpretation.
	My colleagues want to be assured that the timetable is robust and includes adequate scope for consultation and consideration of Sir John Baker's proposals, and that those proposals will establish a robust and independent mechanism. There is a major prize to be gained by all hon. Members, because for the first time, we will be in a position to tell the public that Members of Parliament are not engaged in some ignoble process of fixing their salaries. Our salaries will be determined for us, as happens to people in different walks of life who have no direct control over their pay. Some hon. Friends may argue that we should have a negotiating process, and that otherwise we would perhaps be ceding something that we would never cede on behalf of our constituents. However, establishing independence is vital, and we now have a chance to grasp that nettle.
	The other point that I want to establish is as follows. There is an element of uncertainty to the process, because we are moving the necessary decision making from our debate today, which normally would have been conclusive, to the debate in June, or thereabouts, on decisions that we cannot yet precisely anticipate, because we cannot anticipate what Sir John Baker will do. There is inevitably an element of risk in that process. There is, however, a fail-safe, because the House has the capacity to reject, either in whole or in part, any recommendations that Sir John Baker comes up with. In that sense, it is better to ask Sir John to review those mechanisms independently, rather than keep the process within the confines of the House. In the end, if part of the process is about generating longer-term public confidence in what we are doing, as well as confidence among Members of Parliament, an element of externality in relation to our own pay will inevitably be necessary.

Richard Ottaway: The hon. Gentleman says that the House may choose to reject Sir John Baker's recommendations, but if we accept the Government's proposal to abandon the 1996 resolution, we are left with absolutely nothing. Is that not a good illustration of why we should keep the 1996 resolutions until such time as we can agree on alternative proposals?

Tony Lloyd: No, that is not right, for this reason. I understand the hon. Gentleman's point: if we get rid of the 1996 mechanism today, there will be nothing in place until we see the report. However, it will be in the gift of the House at that stage to delete all Sir John's recommendations and substitute the 1996 mechanism—or, indeed, anything else. It would be beyond belief that the House would be left with no mechanism at all for paying Members of Parliament. That decision is in the gift of all hon. Members, in all parts of the House, and I assure Opposition Members that I will want to go for my summer break from this place in the knowledge that there is a pay structure around which my future is secure. The hon. Gentleman's fears on that point are therefore unfounded.
	In conclusion, I am grateful to the Leader of the House for the work that she has done. The package before us has already generated support throughout the House. It is important that we move forward from that. The timetable will inevitably cause concern if there is even a remote suggestion of slippage, so we cannot allow for any. That timetable must allow for proper consultation with hon. Members before we take a vote. That vote must establish, once and for all, a mechanism independent not only of Members of the House, but of the Government and the Treasury. If we can do that, at last we will have done something worthy of the House and of the British people.

Simon Hughes: We might find this debate a bit embarrassing, but it is one that we properly need to have. It is good that it has been entered into in a spirit of openness and engagement, among the different points of view throughout the House. This will of course not be the last such debate, by definition. There will be at least one more debate when the Government's review commission comes back, and that review will not deal with staffing and office issues, which we will come back too. To think that the issue will fall off the agenda is therefore wrong. None the less, it is important now to give a steer in the right direction.
	I have never had a big problem with the principle that public sector workers—I have always considered myself to be a public sector worker in this job, paid by the public to do a job for the public—could and should have their wages or salaries assessed and decided by an independent process. However, if one takes that view—I am very comfortable about that—it should be a consistent view across the public sector, not a "take it here and leave it there" view. That is why, when we have referred Members' pay to the Senior Salaries Review Body in the past, I have always taken the view that we should automatically adopt what it recommends. That is why the question to the Leader of the House and the shadow Leader of the House about whether Governments in future will adopt what is recommended—to which I shall return—is so important.
	Colleagues and I have not only taken the view that I have set out, but have in recent months taken the view that when an independent body said that nurses in England should be paid without staging, that should have happened. They are public sector workers of great importance and should not have received a staged pay increase when the recommendation was that the increase should be paid all in one go. Likewise, we took the similarly clear view that when police pay negotiations went to arbitration and were decided, the arbitrated amount should have been implemented.
	That is a consistent view, and I am sad that the Government have been inconsistent. Of course I understand the constraints of keeping inflation down and ensuring that the economy does not get out of control; but that will not be significantly impaired if we have mechanisms to take it into account, so that we can come back and recommend certain increases, whether for nurses, the police or Members of Parliament. I would have been happy had the Government said, "Here's the SSRB—we're just putting it on the table and asking you to vote on it." That would have been a perfectly satisfactory outcome.

Mark Field: I am listening to the hon. Gentleman with great interest, and I must confess that I agree with him very much. Matters related to pay are painful, but equally, do they not go to the heart of what it means to be a sovereign Parliament? If we deny sovereignty in relation to our pay, difficult matter though it is, will it not then be rather difficult for us not to have sovereignty taken away or denied in other matters?

Simon Hughes: That is why I have found pay uncomfortable, but never a matter that we should say it was not our responsibility to deal with. If we are a sovereign Parliament, this matter must go somewhere, and it ends up coming to us. That is why constitutional issues are raised when the Leader of House says that, with wide support, she has asked Sir John Baker to examine whether we can have an independent mechanism. Some countries have managed to address those issues. My guess, anticipating the second Baker report, is that he will make it clear that although we can, as it were, make the process independent in future, we will not be able to take away from ourselves the right to retrieve it if we want to. I cannot see that that would be possible or compatible with the constitutional position of the UK Parliament, so the hon. Gentleman—my parliamentary neighbour—is right.
	My second general point is that whatever the case, people would obviously prefer a system even more independent than the current one—and I support that, too. That means a process that examines what the best comparator should be, and then triggers it automatically. But here lies the rub: if we go down that road, when the report comes from the new body—not the Baker review, but whichever body it suggests setting up—or when the formula is worked out saying that we will be compared to pensioners, the average wage, the average civil servant or whatever, the Government must undertake automatically to implement that. The question that, with respect, I would say that the Leader of the House and the shadow Leader of the House ducked was whether they could guarantee that either the Baker report, when it comes, or any future reports issued as a result of the process that Baker recommends, would come without Government interference. Bluntly, unless we receive that assurance, we will be back where we were.
	That is why I asked the right hon. Member for Maidenhead (Mrs. May) the express question that I did. Unless the report is published to the world on the day it is published to the Government, it will always be open to the Government to hold it to themselves, to spin, to leak and generally to prepare the ground—as they have done this time—before we can see the blessed thing. That is unacceptable, not only from the point of view of Members of Parliament but for all my constituents, and anybody else who takes an interest in public affairs.

John Spellar: It might be helpful if we clarified what is being proposed; otherwise we might be going down a blind alley. As I understand it, the Government are asking Baker to examine the next couple of years and then to consider a mechanism that would, in effect, be an automatic indicator, which the Department of Finance and Administration would get from the national statistician or whoever else and would then implement. The other body would deal only with that mechanism, should there be a situation similar to the one involving the civil service pay link breaking down, and should there need to be a reassessment and a new indicator. I hope that I have got that right. If so, some of the concerns that are being raised by the hon. Gentleman—although not all of them—will be addressed. We are not talking about a report coming back; we are talking about an indicator, and that matter is in the public domain.

Simon Hughes: I understand the right hon. Gentleman's point, and I hope that that is where we are likely to get to. I hope that we adopt a system with a trigger that is set externally, without anyone having to look at it all again, except if the comparator did not work, for some reason. However, that has not been proposed here, and it is not mentioned in either of the Government's written statements. Therefore, it is a deduction that might have come from informed conversations with the Leader of the House or from elsewhere. We do not know that yet, however, because the Baker report has not come back to us. However, I am assuming that that is the road that we are going down. Such a system would reduce some of the risk of Government interference, for exactly the reason that the right hon. Gentleman gave. I accept that.

Tony Wright: We are getting into some real complications. It might seem straightforward to say that we will invent an independent mechanism to take care of the matter, but the fact is that there is no reliable comparator for the work of a Member of Parliament. It is a job that requires no formal qualifications, and there is an over-supply of people who want to do it. All that we are saying is that we want the judgment—it will involve a judgment, not a technical comparator—to be made by someone else. What we cannot work out, however, is who that should be.

Simon Hughes: There lies another rub. The hon. Gentleman is right. I believe that it is better for us to accept the Government's proposal for this year. That would involve us asking our colleagues to accept pay restraint for this year in line with other public sector workers, and I support that course of action. However, we should not then leave a blank sheet—a carte blanche—thereafter. It might not be as easy as some might think either for Sir John Baker to come up with a report that commands the confidence of the House and of the public, let alone of the press, or for us to agree on what we should do.
	I heard what the Leader of the House said earlier. Of course she wants us to be able to get on with this. The chair of the parliamentary Labour party, the hon. Member for Manchester, Central (Tony Lloyd), also expressed his proper concern that we should ensure that we did the work between the end of May and the end of July. It all got a bit vague, however. The written statement referred to the end of May, but it could be the beginning of June, and it is likely to drift on. I therefore urge colleagues at least to give us the protection of having a system in place for next year, so that we can do the job that the hon. Member for Cannock Chase (Dr. Wright) alluded to, and get this right. It might not be easy to find a comparator, although we could look at the New Zealand experience.
	My preference is therefore for the amendment tabled by my hon. Friend the Member for North Devon (Nick Harvey), the right hon. Member for Penrith and The Border (David Maclean) and others, which would at least lock in a system for next year and set a top whack of 1.9 per cent. so that nobody would think that we were building a system that would give us a great bonus. That would give us a safety net while we work these things out.

David Heath: I agree with my hon. Friend that it could be difficult to find a comparator that works year on year. That is why I am attracted to the idea of establishing an appropriate base level. I am not sure whether we have arrived at that point or whether the matter needs further work. We then need to establish a simple uprating mechanism that the general public will understand. It must relate not to some grade in the civil service but to something as simple as the old-age pension or some other average denomination that will enable the public to understand why the salary of Members of Parliament has risen.

Simon Hughes: I absolutely agree with my hon. Friend, and I see the hon. Member for Sunderland, South (Mr. Mullin) nodding in agreement as well. He has taken a strong view on this matter. My hon. Friend the Member for Sheffield, Hallam (Mr. Clegg) has argued that his preferred option would be the state pension, because it is simple and because everyone out there knows what the state pension is— [ Interruption. ] I am not saying that it was his idea. The hon. Member for Sunderland, South has argued that case, and I am saying that my hon. Friend the Member for Sheffield, Hallam also supports that argument. He also supports the proposal that we look at the matter independently to find the best simple comparator that will work, if such a thing exists. Obviously, the pension is a front runner among the options, but there might be others. In the end, we must choose something that a tabloid newspaper, the woman in the street or anyone else can understand, and that we can justify and explain in a sentence without having to give a lecture on the subject.

Chris Mullin: The point that the hon. Member for Somerton and Frome (Mr. Heath) has just made is exactly right. Where all this has gone wrong in the past is that the independent bodies that have been set up to assess what we are worth have, from time to time, awarded us—or recommended—whopping increases that are utterly out of line with what is going on in the real world. That has happened under Governments of both persuasions, and they have quite rightly felt obliged to intervene and put a stop to such madness. My fear is that the Baker review might end up doing the same thing. It might be terribly independent, but if its recommendation is wholly unrealistic, we are going to find ourselves back where we started.

Simon Hughes: I share that view entirely; the danger is that what has happened in the past might happen again. If there is a recommendation for a low increment, the Government might say, "Yes, thank you very much", but if there is a recommendation for a high increment, for whatever reason, the Government could intervene and say, "No, thank you very much. Not now." That cannot be acceptable.

John Maples: I do not think that the hon. Member for Sunderland, South (Mr. Mullin) is right. The reason that a whopping great increase, as he put it, is recommended every so often is that increases have been suppressed by the Government for the previous four or five years. That is what has happened on every occasion. If we had a mechanism, for example, for implementing whatever increase had been applied every year to public sector salaries—2 or 3 per cent., or whatever—this issue would never arise. We would never have a really bad increase, and we would never have a really big one. I think that we, and the public, would be satisfied with that.

Simon Hughes: The two points of view are not contradictory, but I agree with that argument. The report makes it clear that, in the past, there have been recommendations for a catch-up and that, because they were so big, the Government have not implemented them. Unless we have a regular annual increment, we shall always find ourselves in that position.
	I also strongly support—and urge Members to support—the idea that the Members Estimate Committee, under Mr. Speaker, should also do its work on this matter. I do so for two reasons. One is that the House, with all its experience of what it all means, can look at the matter. The other is that the staff of the House, who have all the experience of administering the system, can give the benefit of their wisdom and experience and all the money that we have paid them over the years. It would not be inconsistent for us to have an independent review as well as doing our own work on the matter. I absolutely support the view expressed in the amendment tabled by the right hon. Member for Penrith and The Border that we should give authority to the Members Estimate Committee to do a parallel piece of work, so that we can have that in front of us as well.

Mark Field: rose—

Simon Hughes: Let me carry on for a minute. I might come to a natural point at which the hon. Gentleman can intervene.
	I support the Government's recommendation on pensions. Other Members might want to elaborate on that subject, but I do not propose to do so now. My final point is on staffing, offices and allowances, and I shall start where the right hon. Member for Maidenhead started. I want to say, as explicitly as she sought to do, that this does not involve money that we are given to allocate either to ourselves or to others. It is not an allowance that I can choose to spend or not. Money goes from the taxpayer into the Fees Office, and from the Fees Office directly into the bank accounts of our staff, without our touching it. All that we do is agree how much of the total amount available should go to them.
	The sum that we are talking about is currently £90,505 a year, and that is meant to pay for the salaries and national insurance contributions of three people. Some of us employ more than three people, however, and it does not take a genius to work out roughly what people are paid. They are not paid huge sums for the job that they do, given the importance of their job of looking after constituents such as yours, Madam Deputy Speaker, and mine, who come to us with evictions, housing and benefit crises on a daily basis. They need to be decently looked after. That is why I absolutely support going down the road, as the Government recommend, of an increase of half a person in the potential number we can employ—taking it to three and a half people, as it were. As it happens, I employ four people at the moment and others who assist.
	Let me add another postscript. It is not proposed that the three and a half people should be paid at the same rate as now, because the increment provides for a few thousand pounds extra over the current arrangements. For the record, the recommendations are that for three and a half staff employed outside London the total staff bill should be £96,630, which would go up to £102,650 when all the staff are in London.
	I hope that colleagues will vote for my amendment (b). The Leader of the House was good enough to say that she intends the proposals to come into effect from the beginning of the new financial year, which I accept, but I want us to lock that in so that we can plan ahead, knowing that in the new financial year we will be able to pay for three and a half staff with funds provided from the taxpayer via the Fees Office. That is not unreasonable— [Interruption.] For London, yes.

Andrew MacKinlay: I am a bit nervous about the London dimension, partly because of my geographical position. My staff do not work exclusively in the constituency; some just work in the Palace of Westminster. I am a bit nervous that whoever reviews the position is going to get in an awful mess and perhaps be unfair, not to me but to my staff. It does not work so neatly for Members in my geographical position, who are just outside the Greater London authority area.

Simon Hughes: I absolutely understand that. That is why I support the proposal that the administration of this matter, including its interpretation, should go to the Members Estimate Committee, as recommended in the motion. The proposal should be subject to that process, but it should not be subject to a delay in respect of the year to which it applies. There is no significant difference between the hon. Gentleman and me. The decision should apply from 1 April, but the details of definition need to be worked out fairly.
	The hon. Member for Cities of London and Westminster (Mr. Field) rightly identified that all the recommendations bar one have been dealt with. Three relate to staff and we are asked to agree to them, while we are asked to refer the rest to the MEC and other deliberative bodies. One, however, has been dropped and eliminated. I declare an interest in the matter, but I cannot help it because I am an MP representing an inner-London constituency.
	Presently, inner-London MPs and outer-London MPs may opt for a London allowance in line with many other London public sector workers, as opposed to an alternative that in theory is more generous. The Senior Salaries Review Body report says under the heading of "London Supplement" in paragraphs 5.58 and 5.59:
	"The Supplementary London Allowance...which is currently set at £2,812 is payable to MPs with inner London constituencies who are not eligible to receive ACA and to MPs with outer London constituencies who do not claim for expenditure under the ACA."
	It goes on to say that comparable circumstances were looked into and it concludes:
	"We believe that the London Supplement should be increased to reflect the extra living costs found in London and therefore recommend that the London Supplement be increased to £3,500 and henceforth...in line with the Public Sector Average Earnings Index".
	That must surely be included in the basket for consideration; it is nonsense to take that out altogether as if it were not a serious issue. It is an issue for Greater London MPs of all parties. I hope that colleagues will vote accordingly and that the Government will accept it.

Stephen Hammond: My hon. Friend the Member for Cities of London and Westminster (Mr. Field) and I gave written and oral evidence to the SSRB on that point. The hon. Gentleman quoted the recommendation of £3,500, but if he reads the supporting evidence he will find that KPMG suggested that the comparator should be £4,000. We are asking not that that be put into effect—the hon. Gentleman has made that point—but for the appeal process and for it to go to the MEC. That must be right. If the SLA is pay, the additional cost allowance must also be pay; the Government cannot have it both ways.

Simon Hughes: Whether or not MPs represent Orkney and Shetland or the Cities of London and Westminster—the two most extreme examples—it must be right that all the issues are referred to the body. It cannot be right for the Government to be able to take one out and throw it away.

Mark Field: Although I may have been called extreme at certain times, I am sure that the hon. Member for Orkney and Shetland (Mr. Carmichael) has not been called that on too many occasions. I appreciate that the Leader of the House is also an inner-London MP, representing Camberwell and Peckham. She made the statement and it has been put that somehow the London allowance is simply an issue of pay, but in our view it is a small compensatory allowance that makes a contribution—only a small contribution—towards the otherwise un-reimbursed expenditure entailed in making a main home, as opposed to a second home, in central London. That is why we feel that this matter should go to the MEC. The option of taking an ACA is not open to us 26 Members, but for those who are not entitled to an ACA or who choose not to take it in preference for a London allowance, there is comparability. We hope that the Leader of the House will take notice and ensure that recommendation 29 goes to the MEC.

Simon Hughes: I ask colleagues not only to vote for that but to bear in mind that it is completely illogical to have recognised that relative office costs as well as relative staff wages in different parts of the country should be reflected in the allowances and not to apply the same to Members of Parliament who live in central London or inner London. I emphasise that we are not voting now for any extra expenditure on anything; we are voting only for these matters to be looked at, which is surely the responsible thing to do.
	The proposed process will look at the additional costs allowance, which has been the most controversial allowance for parliamentarians. It allows MPs who do not live locally to claim for a second home or a second place to stay. Of course nobody would expect you, Madam Deputy Speaker, to go back to the west midlands every night or others to go back to Scotland or Wales, so there must be a process for recompense. That is perfectly proper. My personal view is that for outer-London MPs, the current situation is no longer justified—

Richard Ottaway: Wrong!

Simon Hughes: Well— [Interruption.] I will give way to the hon. Gentleman, whom I respect, but I am saying only that the current position needs to be reviewed, which is the clear implication of the report. None of my outer-London Liberal Democrat colleagues claim it; though some Members claim it when they live very near to the borders of inner and outer London. I am simply asking for it to be reviewed because, in my judgment, that is what has brought the House into the greatest disrepute, so it needs to be sorted. That is all; I am arguing no more than that.

Richard Ottaway: I apologise for my intemperate reaction to the hon. Gentleman's remark. I do not know when he last tried to get down to south Croydon but I can tell him that it takes a heck of a long time, due to the Government's totally inadequate transport provisions. It is a fact that one can get to Reading quicker than one can get to south Croydon. If he pursues this argument, it will not stop at outer London: the whole of the home counties will have to be included. He might find that he will have some difficulty carrying people with him.

Simon Hughes: I respect the hon. Gentleman, as he knows, and I have been to Croydon, including south Croydon, many times. All that I am saying is that this has been the most criticised area of our allowances. To quote the report, it says that
	"we are concerned that it is in the area of ACA that the greatest scope for abuse is thought to exist."
	All that I am arguing is that the matter should be looked at and reviewed. I will not give way further, as I do not want to wear colleagues' patience; I want to carry them with me.
	In relation to the point made by the right hon. Member for Maidenhead, the current proposal allows the Willie Hamilton election campaign grand finale to start again. At the moment, rightly or wrongly, colleagues have a final-year compensation amount when they finish their service as MPs. Under the proposal, an MP would get that payment only if their constituency was abolished or they had been defeated. So when they came to their natural retirement age, they would have to find a seat that they did not want to fight and that they absolutely hoped that they would not win—what would happen if they did would be a different question. Clearly, that is nonsense. The resettlement grant and the issue of compensation on leaving office need to be looked at.
	The last issue is that of offices and staff location, which was raised by the right hon. Member for Maidenhead. This is only a suggestion, but I support the idea that there should be an assessment of how much space we need—it might be 800 sq ft or it might not. Having done that, there would be a process to pay for that separately, and the costs would be different in different parts of the country. We would probably need a system in which a similar person, company or body would do that assessment in Orkney and Shetland and in London, to avoid unfair comparison. Rather than the same outcome, there should be a standard process of evaluation of what is a fair and reasonable cost.
	If we spend our time saying how important Parliament is, we must all assume that we are entitled to have at least one or two people working for us here as part of our job. If people ring the House of Commons and get a voice on an answerphone, that is not a satisfactory service. We cannot be in our offices when we are in the Chamber, in Committee or doing other things. We must have a system that allows MPs to have staff in the Palace of Westminster, as their base, without penalty, as well as staff in their constituency, where they are also needed. Those are important matters, and my request is that all, not some, should go for independent assessment.
	In relation to salaries—I end where I began—we should move down a road of an independent process, but not assume that the Government will suddenly change the habit of a lifetime, speed through, come up with a wonderful solution and leave it to us to decide without interfering. We must put in place a system that protects us next year. Consistent with public sector pay restraint, however, it should give us only a limited increase next year, as we accept a limited increase this year.

John Spellar: I shall concentrate my remarks largely on pay, because the section on allowances has in the main been referred through the Members Estimate Committee to our panel. We wish to evaluate those suggestions properly without preconceptions.
	I agree with the comments of the right hon. Member for Maidenhead (Mrs. May) that it would be much easier to deal with questions of allowances if elements of the media did not endlessly misrepresent them as part of our income. That is acknowledged in paragraph 1.12 of the SSRB report:
	"Some observers are quick to conclude that an MP is paid too much, particularly when looking at the headline total of salary plus expenses."
	I also counsel Members that so-called transparency is no magic solution. The situation in Scotland has demonstrated that only too clearly, to the extent that one MSP was attacked for spending money on coffee in his constituency office.
	The matter of pensions will be considered elsewhere, and the hon. Member for Bournemouth, West (Sir John Butterfill) is in the Chamber and will no doubt comment on that. I am concerned, however, about reference to so-called gold-plated schemes compared with other public sector schemes. We as MPs have a high contribution rate, much less security of tenure and later retirement. We do not have the early retirement enjoyed by many of the uniformed services—I hasten to add that those schemes are provided for understandable operational reasons. At the same time, however, we abrogated the option of retirement at 60 on the grounds that that example would be followed by those in the wider public sector. Unfortunately, they have not found that example particularly inspirational.
	To return to pay, the basic facts are rightly outlined by the SSRB in paragraph 3.2, which records that the evidence given on Members' behalf by the advisory panel showed that
	"MPs' pay had not kept pace with the Average Earnings Index since 1997, and had failed to match the Retail Prices Index since 2003."
	The PricewaterhouseCoopers study—which, admittedly, involves some difficulties—showed that the gap between MPs' pay and that of private sector comparators had also grown.
	As paragraph 3.18 of the SSRB report explains, unlike the annual increases of many in the public sector, ours is an actual earnings increase. Why? Because we do not have the increments, performance pay or other forms of pay progression that are common and, indeed, increasing in many parts of the public sector. That is why the mechanism that linked us to certain pay bands became so unsatisfactory in the end.
	I must say in parenthesis, and partly in mitigation, that I only became chair of the advisory panel after the last election. I was astonished that anyone would agree to be linked to someone else's pay rate rather than their earnings: I had thought that that was in chapter 1 of the shop stewards' manual. Members will recall, however, that we did get a cycling allowance out of the last settlement.
	The SSRB report acknowledges the problem, but I find it disappointing that the board did not want to address it earlier. The report states quite openly that it
	"did not wish to distort the senior civil service pay system simply to produce a more appropriate result for MPs",
	although it seems to have been content to distort our pay system as a consequence. As we all know, we received only 0.66 per cent. last year. That is worth repeating, just so that the public get the message loud and clear.
	The basic facts are these. If our salaries had kept pace with the retail prices index in the last five years, we would have not our current salary of £60,675 but a salary of £64,418. If our salaries had kept pace with average earnings, we would be on £66,170. If our salaries had kept pace with the public sector average earnings index, we would be on £67,684. The problem has been exacerbated in the last three years, with increases of 2 per cent., 1 per cent. plus 1 per cent. staged over the year and, most notoriously, 0.66 per cent. last year.
	The SSRB has acknowledged part of the problem, and we should be grateful to it for that. It has taken on board not just the comments of the advisory panel, but those of many individual members who not only followed our evidence but made inquiries in their localities about the pay enjoyed by directors of services in their local councils, head teachers in some of the larger schools and so on. At least in my experience, many were slightly surprised by the change, and the rate of change, in those jobs over the last few years.
	Unfortunately, the SSRB proposes to remedy that by means of a mechanism that I still find confusing. It talks of linking us to the average percentage increase in the base pay of the senior civil service, by which, it says that
	"we mean the amount by which the average base salary of all SCS members increases year on year as a result of individual performance awards."
	It then states that the amount
	"excludes non-consolidated bonuses for which SCS members are also eligible."
	That sounds to me like an unnecessary complication, possibly containing the seeds of further difficulties in the future. It would have been much simpler, even within that indicator, to take a straightforward figure, namely the amount by which senior civil servants' take-home pay rises during the year. I hope that Sir John Baker's further study will take that into account. We should also ask him to examine the question of remedying the considerable shortfall.
	It also concerns me slightly that the report does not really capture the life and work of Members of Parliament, although, as we know, the subjects are very much intertwined.

John Bercow: For the avoidance of doubt, will the right hon. Gentleman say whether he agrees that it is not to the rate of increase that we need to be linked, but to the base from which the increase takes place?

John Spellar: I was going to deal with that later, but I shall do so now. There are two elements that we need to disentangle. One of them is the extent to which, for a variety of reasons, we have fallen behind comparators in earnings, and therefore the extent to which there needs to be catch-up in order to establish the proper base. The second element is how we decide what the increase will be year on year in the future—what mechanism might we put in place to prevent this matter from having to come back before the House. I urge that they are treated as two separate issues. We do not need to say, "This is the comparator we are dealing with to look at what should be the base figure", and to be for ever tied to that particular group. It might be the case that we are tied to that group, but we might instead look at a basket of groups and at an average increase. The two issues are not integrally linked, and it would be a mistake to link them as we would then be back in the situation of having reports and analysis, all of which become arguable, debatable and, ultimately, votable.
	Let me return to the issue I was addressing. The PWC report states boldly that the evaluation results do not take account of the extensive working hours of a Member of Parliament. It says that it assumes that we work a normal professional working week. I remember a good colleague of mine who was an Australian Senator and who then entered the private sector saying to me, "The big difference between full-time in this game and in the private sector is weekends." I think all Members will understand that comment. I do not say that we work every hour of every day of the week, but there are always pressures on us to do so. That is underestimated and misunderstood.

Nicholas Winterton: I am delighted that the right hon. Gentleman has raised the number of hours that the overwhelming majority of Members work, particularly when the House is sitting which is for more than half the year. Including time spent travelling to and from my constituency, I estimate that I spend an average of 85 hours per week on parliamentary and constituency work when the House is sitting. That is more than twice the normal working week in this country.

John Spellar: Some Members used to be trade union officials. I remember people saying, "You should be paid the average wage of the members." As I was negotiating for Fleet street at the time, that was not so bad, but my response always used to be, "Would that be with overtime at premium rates?" I do not say this by way of complaint, but Members should look at their hourly rate.
	Our job has a high level of input, and there have been changes that have increased that. One of them is the increase in our case load. Another is the increase in the number of campaigns that are directed at Members, and which require either correspondence or attendance at meetings. In the past, many examples have been given of the increase in mail, but I am sure that all Members will have experienced an exponential increase in e-mail, even over the past 18 months—and not just the standard correspondence on issues, but many more constituents e-mailing about individual cases and problems.

Linda Gilroy: Has my right hon. Friend's office noticed that whereas organisations used to send us hard copies of material, they now tend to e-mail it so that it needs to be run off? As that might happen 20 or 30 times a week, that also has to be fitted into our time and our staff's time.

John Spellar: My hon. Friend is right. The PWC report misunderstands the situation when it says that problems of work load are to some extent within MPs' own control. There is an element of truth in that, but it underestimates some of the pressures that MPs are under.
	As I was saying in reply to the hon. Member for Buckingham (John Bercow), we should try to disentangle these elements. The Government motion helpfully provides the opportunity to do so. The first such element is the baseline for our calculations. The SSRB says that we are some 10 per cent. behind, although that is if everything is taken into account. Our basic salary is 14 per cent. behind, even on the SSRB's comparators, and we are 15 per cent. behind on total cash. The figure needed to catch up is somewhere between where we are and £66,742. Interestingly, that figure is only a little above what we would have received had we kept pace with average earnings.
	I must take slight issue with the comments made by my hon. Friend the Member for Sunderland, South (Mr. Mullin). He said that some past increases had not been connected with the real world. In fact, those past recommendations were designed to catch up with changes that had already taken place in the real world.

Chris Mullin: Up to a point, Lord Copper. When my right hon. Friend was saying how far we had fallen behind, he drew the line at 1997. In 1996, we voted ourselves a 26 per cent. increase, at a time of 3 or 4 per cent. inflation. It is that kind of thing that gets us a bad name.

John Spellar: My hon. Friend is quite wrong. That increase reflected several years during which, for a number of reasons—it was often because of the pay policies, under all Governments—we had fallen seriously behind comparable public and private sector jobs in the outside world. He is right to say that those large leaps do not favour us—as has been said, moving in line with the other indices would be a much better way of handling things—so we possibly come to the same conclusion, but we do not necessarily have the same view of the history.
	What do we need to do to resolve the situation so that we do not have to discuss this issue in the future? We have talked about the question of catching up. We need an index by which pay will be automatically uprated without a confirmatory vote. We must be clear that this is not about a review body examining various indices and coming up with recommendations. The situation should be—I think that there will be broad support in the House for this—that on, or shortly after, 1 April each year the Department of Resources, the old Department of Finance and Administration, would contact the Office for National Statistics or whatever the appropriate body to say that we are linked to such an indicator and detail the increase in the past year, and there would then be an automatic uprating. I do not care what the indicator is. It could be the retail prices index, the average earnings index, the public sector average earnings index or even the Chicago grain index. In a sense, that is less relevant than the fact that it needs to be something that the public understand and that is therefore clearly in the public domain and is not influenced by our particular actions. The public sector average earnings index might be the better one to use to try to provide a greater and clearer linkage.
	I am not keen on a link to just one small part of the civil service, because organisational and structural changes could take place, which would then have a significant effect on us. There is one possible attraction of being linked to the senior civil service, because in my experience, senior civil servants always seem to have done well in finding ways through the pay policies of both Governments. However, in general, we would be better considering a basket of agreements and taking the median or another average. I believe that that is the offer that has been made to the police. I hope that Sir John Baker will take that on board. I also hope that when we come back to the matter before the summer recess, we ensure that that is clearly understood.

Mark Field: Is there not a concern that irrespective of whether we use a basket or some level of comparability, particularly one that involves public sector pay, where, directly or indirectly, we have all had an influence, the media will still raise their hue and cry whenever a figure is announced? Even if one of those independent mechanisms were properly implemented and all the concerns raised in this debate were addressed, the issue would still become a media hue and cry. Therefore, it is for us, as Members of Parliament, simply to bite the bullet and to drive forward the right sort of pay package, given that we believe in the idea of a sovereign Parliament. I have a lot of sympathy with everything that the right hon. Gentleman is saying, but I fear that we would be back to square one the moment such a mechanism comes into play.

John Spellar: A sovereign Parliament would make a decision before the recess that our pay increases should be linked to a particular indicator. At some stage in the long distant future, if that broke down, something would have to happen to it.
	In a sense, there is a mechanism to deal with failure, and we have had one failure with the links to the senior civil service. That mechanism is that Sir John Baker should consider forming a new body. We must make it clear that such a body should not be designed to make endless reports on pay but to deal with any failures in the system.
	There is an unspoken question about who will decide whether there has been a failure. Will it be the House of Commons and the MPs, or the Treasury? Nothing is perfect about any form of pay-setting. However, such a solution would get rid of many of the problems and difficulties that we face, particularly when we have to vote and argue about our pay. That is a particular problem if it is linked to a factor over which we do not have any direct influence, whether it is an index based on prices or earnings—that is why I have suggested a fairly wide index.
	It is important that a clear message goes back from all parties, including the Government, that the increase should be implemented according to the percentage increase that has taken place. That is why the mechanism is so important, as it effectively takes the decision out of the hands of Government and puts it into those of the Department of Resources—which used to be known as the Department of Finance and Administration—which will operate under the directions of a resolution of the House.
	My final point has been made by a number of other hon. Members, but it is worth reiterating. This has dragged on too long. The SSRB was commissioned to produce the report in July 2006. It reported in July 2007 and we are debating the report in 2008. I urge the Leader of the House and the Deputy Leader of the House, when she replies, to be clear and explicit that the timetable for the report will be that it should be received, published, debated and voted on before the summer recess.

Michael Spicer: Again, this is a question of timing, which is essential. May I ask the right hon. Gentleman the question that I asked the hon. Member for Manchester, Central (Tony Lloyd)? Does the right hon. Gentleman have any insight about when the measures will all be implemented? Does he know when the Government intend to implement them? Has he been given any commitments that we have not yet been given?

John Spellar: There were a number of indications from the Leader of the House that she hopes to get the report received, published and voted on before the summer recess. I want the report to be received by the end of May, as a preference, and by the first week in June as a necessity. It should be published at that stage and debated and voted on during the end of June or beginning of July.

Michael Spicer: That describes the voting procedure. However, when will the new mechanism be implemented? In which year will it be implemented? Has the right hon. Gentleman had any assurances about that?

John Spellar: There are two issues that we must disentangle. The first is the question of the next two years. I understand—the Deputy Leader of the House can confirm this when she sums up—that Sir John Baker will be asked to produce a report on the next two years and then a mechanism, or, in other words, an index, to take us beyond that period.

Simon Hughes: That may indeed be the case, but it is certainly not what the terms of reference say. The implication is that Sir John will come up with a mechanism for immediate implementation.

John Spellar: Yes, but a mechanism can be twofold. The first element is the need to deal with the immediate issue, which also deals with the question of catch-up. The other element would be an automatic linkage that would operate once we had established the base. I hope that Sir John Baker's report will separate those two strands and establish the base, after which we can consider the rate of future increases. That will allow us to get back to representing our constituents, legislating and debating the issues facing the country. I think that hon. Members of all parties do that job rather well.

David Maclean: It is a privilege to follow the right hon. Member for Warley (Mr. Spellar), with whose speech I agree entirely.
	All colleagues have begun their contributions by congratulating Sir John Baker and the SSRB on the report that has been produced, but it has been noted already that one or two little difficulties remain, especially with those parts of the report that deal with allowances. I suspect that more difficulties will be highlighted as the debate goes on.
	May I suggest, in the nicest possible way, that the SSRB has not grasped some of the intricacies of our allowance system? The result is that there are difficulties with what is being proposed in the report. I cannot comment on behalf of the Directorate of Resources—what used to be called the Fees Office—but I suspect that its excellent staff would encounter enormous difficulties in implementing and enforcing some of the recommendations that the report makes about constituency offices, space allocations, costings and incidental expenses provision—IEP—changes for some colleagues.
	The proposals are almost unenforceable. We cannot have transparency in our allowances if we cannot devise a system to enforce the changes, or understand what the SSRB is recommending. The Leader of the House is therefore right not to implement the recommendations verbatim and to refer them to the MEC. That Committee is supported by the Advisory Panel on Members' Allowances that is chaired by the right hon. Member for Warley, and it will be able to sort out what amounts to a bit of a mess in the SSRB report.
	Who are the dangerous men and women on the MEC who have been given that responsibility? They are exactly the same people as those who make up the House of Commons Commission. They meet at the same time, but the agendas are different: sometimes a person is a member of the MEC, at others a member of the Commission.
	The MEC is chaired by Mr. Speaker. Its next most distinguished member is the Leader of the House, followed by the shadow Leader of the House, the hon. Members for Middlesbrough (Sir Stuart Bell) and for North Devon (Nick Harvey) and myself. The MEC does not leak, so I cannot reveal what we discuss, but I can say that we meet regularly. The Leader of the House has entrusted us with making sense of that bit of the SSRB report that deals with allowances and, in conjunction with the right hon. Member for Warley, that is what we will try to do.
	We will be served by some incredibly clever people in the Directorate of Resources. I have had the privilege of serving on the MEC and the Commission for two years, slightly longer than the Leader of the House. When I say that, I am not being arrogant: I simply mean that I have had the privilege of seeing more papers produced by the men and women in the Directorate of Resources than she has. I have been delighted by their excellence, and can say that the MEC is exceptionally well served.
	If the House gave the MEC authority to produce its own suggestions for a suitable pay and allowances mechanism, we would rely heavily on the Directorate of Resources staff, and we would look to the Library's research department for background information. We would also lift some stuff from the SSRB report, given that much of the relevant work has been done already and makes sense. It is possible that we could produce some reasonable suggestions for the House's consideration.
	If the recommendations in any memorandum, report or little review that the MEC might prepare turned out not to be sensible, colleagues would be very quick to bin them and our names would be mud. However, I believe that we could produce some sensible suggestions, as we might be able to consult hon. Members of all parties more thoroughly than the SSRB.

Stephen Hammond: I listened carefully to what my right hon. Friend said and he is absolutely right. Does he think that the Members Estimate Committee would be overburdened if it were also to consider recommendation 29?

David Maclean: I will leave it to my hon. Friend to convince the House that the Committee should be given that task, too. I think that our burden will be fairly heavy as it is. There will also be a heavy burden on our officials, who will have to help us untangle some of the allowances difficulties created by the SSRB report. We would probably be at maximum capacity if we took on the responsibility that my hon. Friend mentions, in addition to having to reach a view on a mechanism for determining MPs' pay, so that we did not have to vote on the issue every other year.
	I have not set out terms of reference. I would say to the House, "Trust us." We on the MEC and the House of Commons Commission do not need to tie our hands with terms of reference. We want to bring forward proposals on an independent mechanism for the House to consider. We would not tie our hands with principles that I think are wrong. The right hon. Member for Warley commented on some of the principles that the SSRB set out on page 7 of volume 1 of the report. The SSRB says that it is tied to the fundamental principle that
	"Pay should reflect levels of responsibility rather than workload".
	On page 16, the SSRB reassess MPs' work load, which it says has increased steadily. We accept that that is the case. Expectations of what MPs can achieve for their constituents are rising, and e-mails come in all the time. The work load is increasing. It goes on to say:
	"To some extent the problems of workload are within MPs' own control."
	With all due respect, it has confused work load and hours. Our work load is increasing all the time, but our hours have stayed fairly static, at 60, 70 or 80 a week. I could reduce my work load. I could, on Armistice Sunday, refuse to go to the service in Carlisle in the morning and the one in Penrith in the afternoon. I could refuse to do Saturday surgeries, and could refuse to go to council meetings on a Friday night. We could reduce our time commitment to 40 hours a week, but would that be the responsible, sensible thing to do? Would it be serving our constituents if we refused to do all the things that we have to do that take us 80 hours a week when the House is sitting and 60 hours a week when it is not?

Desmond Swayne: Mr. Speaker has informed me that he has not selected my amendment for debate; might we not, in a similar way, write to our constituents and tell them that unfortunately their letter was not one of those selected for reply?

David Maclean: When I first came to the House in 1983 there were stories about some of our illustrious predecessors, from both sides of the House, who did not believe in holding surgeries. There is a wonderful story—perhaps it is apocryphal—about a Member who would telephone his constituency association and say, "I shall be making my annual visit to the constituency in March. Please lay on the cocktail party." Those days died out 20 or 30 years ago, and rightly so. The service that we are now expected to give is heavy. There is no shortage of people who are willing to become MPs and take on a work load of 60, 70 or 80 hours a week, but I believe that the pay should reflect that burden.
	In the second section of the report, the SSRB and PricewaterhouseCoopers set out some comparators. On page 17, the total package for MPs—our total reward, including pensions—is compared to that of a head teacher, a police superintendent, a senior civil servant at grade 1, a county council second-tier executive, an armed forces colonel and a director of a health trust. Our salary comes out as 90 per cent. of theirs; in some cases, it is 83 per cent. When the comparison is with those in small companies, the figure is 58 per cent. However, that is on the assumption that we are doing a 40-hour week, as many people in those professions are.
	Can anyone imagine the outcry if the House or the Government had said to doctors, "We're going to fix GPs' salaries, and there's going to be an assumption that they're doing only 40 hours a week"? We know that they work excessively long hours—60 or 70 hours a week—and their pay reflects that. Conversely, could we say to the chief executive of a small district council, who, it seems, is on £81,000, "We'll pay you £81,000, but dear chap, you'll no longer work 40 hours a week; it's going up to 70"? There would be an outcry.
	So I believe that the SSRB has misled itself from the beginning in fixing as a fundamental principle that it does not consider the hours that MPs work or take the work load into account. If that were taken into account in a review, we may come out with slightly different comparators.

John Butterfill: Does my right hon. Friend accept, as he will hear when I speak later in the debate, if I am able to catch the Speaker's eye, that the situation is rather worse than that? The costs, as assumed by SSRB, of our pension scheme, as assessed by Watson Wyatt, contain a number of fundamental and serious factual errors by Watson Wyatt.

David Maclean: My hon. Friend is respected in all parts of the House for the tremendous amount of work he has done in chairing our pensions committee. No one can speak with more authority on House of Commons pensions than he can. I hope his words will carry weight in all parts of the House.
	I quote the examples from the report not because I want us automatically to link our salaries to them, but to show where I believe the SSRB has slightly misdirected itself. I hope that if we on the MEC can do a review, we would not tie our hands in such a way, we would consider the work load and the hours that we work in addition to the other factors, and we would look at a basket of comparable jobs in the public sector and the private sector, and not limit ourselves to the basket that is included in the report. There is a range of other comparators that could be included in the basket. From what I have seen of the staff of the Fees Office and the Directorate of Resources and the expert researchers in the House of Commons Library, I believe that we could come up with recommendations as good as, if not better than, those that Sir John will produce.
	And there will be something else. Sir John will make his recommendations to the Government. That is fair enough, and I accept entirely the assurances of the Leader of the House that the Government will not sit on the report for six months this time; it will be brought quickly to the House. If we, the Members Estimates Committee, had given the stamp of approval to bring forward proposals to the House today, we would be reporting to all Members—to the House. At some point it would be up to the House collectively and all Members to grasp the nettle of what we had proposed. If all colleagues thought that what we proposed was nonsense, it would soon be binned. If they thought it was right, we could go ahead with it.
	I know that my amendment refers to an independent pay review body. I am not tied to that. I had to submit my amendment rather hastily. If I were to redraft it, I would refer to an independent pay mechanism. That is what we must seek to achieve—a mechanism that could be linked to a basket of salaries or something else, and which would be uprated each year by the Fees Office. The Directorate of Resources would look at the comparators and the mechanism and automatically adjust it. If at some future date it went all askew, the House would have to grasp the nettle and do something about it. Any independent pay review should report to the House, not the Government. That takes the Government's hand out of the matter.
	I will support the Leader of the House this afternoon on her motion of expression of opinion. I have no wish to rock the boat on that. However, I beg those on the Government Front Bench to accept my amendment and let the MEC have a go at producing proposals. I know that the Leader of the House said that we could produce a memorandum. We do not need the authority of the House to produce a memorandum, a document or a review. The MEC can do that, but we do not have the automatic right to have it considered on the same day as Sir John's report. It could sit on the shelf in the Vote Office. Yes, we could take the guts out of it and table it in an amendment, but as the MEC is chaired by Mr. Speaker, we cannot have an amendment advocated in the House by a Committee of which the Speaker and the Leader of the House are members.
	I seek a commitment from those on the Front Bench. I would happily withdraw my amendment. I do not particularly want a vote on it, but I know that a head of steam has built up from colleagues on both sides because what I am proposing is reasonable and innocuous. If we produce a memorandum or a document of some sort—we are not in the business of an alternative review; I am not rubbishing Sir John at all—please let us have it considered at the same time as Sir John's report, as an alternative. That would remove a difficulty for the Government and for everyone else, except perhaps myself given the work load of the MEC in producing this.

Nicholas Winterton: My right hon. Friend is about to finish and he has not touched on a subject that has not been raised certainly while I have been in the Chamber, and that is the mileage allowance. Sir John Baker's report recommends that the mileage allowance should remain as it is. Bearing in mind the dramatic rise in motoring costs in recent times, and the diversity of need for a motor vehicle between those who represent large constituencies many miles from London and those who live in urban areas, is it not time that a more rational, responsible and realistic mileage allowance was agreed?

David Maclean: My hon. Friend has for some time been raising the question of the mileage allowance of which he has long experience, and I will let him speak for himself on that matter. I would not like to incorporate it into my amendment. I could say facetiously that if he got a quad bike it would be a lot cheaper to run, but one gets a little more abuse as well.
	I end by reassuring all hon. Members, particularly Government Members, that I will vote for the Leader of the House's motion even if she votes down my amendment. I do not particularly want to force a vote, but many colleagues expect me to do so. If I can have the assurance that the Leader of the House will bring forward our MEC memorandum and allow it to be considered, debated or voted on when Sir John produces his no doubt excellent independent report, I would not wish to force the matter to a vote. I have signed some other amendments, but I accept the Government's and the Opposition's exhortations that we should stick with the pay norms that they recommend.
	That is a simple request. I am not out to damage the Government or to harm the Opposition. My amendment is innocuous and straightforward, but it is a chance to give the MEC the opportunity to sort out our pay just as we have been given the responsibility of sorting out our allowances.

Linda Gilroy: It is a pleasure to follow the right hon. Member for Penrith and The Border (David Maclean) who, along with his fellow members of the Members Estimate Committee and the Commission, puts much time and effort into representing our interests. I am also grateful to my right hon. Friend the Member for Warley (Mr. Spellar) for setting out so very clearly the facts regarding hon. Members' salaries in recent years and their context.
	I support the position outlined by my right hon. and learned Friend the Leader of the House. It is certainly right that we should be consistent with what we have asked public sector workers to take by way of salary increases over the past year. I wish Sir John Baker and the MEC well in carrying out their further reviews. They will need to grapple with a number of issues that will no doubt in due course attract well-reasoned representations from hon. Members.
	I should like to seek clarification from my right hon. and learned Friend on one issue. If we support the proposal to increase the staffing allowance immediately, will the MEC still be able to consider automatic uprating of the salaries of members of our staff? I want to draw particular attention to chart 3 on page 33 of volume 2 of the review, which shows that 19 per cent.—almost one in five—of MPs passed on less than 80 per cent. of their staffing allowance to their staff, and less than half of staff received bonuses. The ceiling on staffing allowances is uprated in April each year by the increase in the average earnings index, but staff pay is not automatically increased. The report notes the evidence given by staff representatives that many MPs do not pass on the annual uprating.
	The SSRB report concludes that the House authorities should consider issuing a notice to MPs in March to remind them of the opportunity for uprating. I think that a rather weak way of addressing the issue, especially at a time when, as my right hon. Friend the Member for Warley so ably set out, we are looking for an automatic uprating for ourselves; what is sauce for us is sauce for our members of staff as well.
	I turn to another staff allowance matter, which will be referred to the MEC. Recommendation 19 is about the "Staffing Allowance"; it states that it should be renamed "Staffing Expenditure" and that the "Temporary Secretarial Allowance" be renamed "Temporary Secretarial Expenditure". The SSRB says:
	"it would help to avoid misunderstanding or misrepresentation if allowances were renamed to make as clear as possible that this is not money which in some way augments MPs' salaries, but indeed is expenditure necessarily incurred to do the job their constituents and the nation expect of them."
	I share the pessimism of my hon. Friend the Member for Manchester, Central (Tony Lloyd): changing the names may not change how such matters are covered in the press. However, we should recognise that when the package is described as a gravy train, that is not only a matter of concern to MPs; it is not very nice for the staff to be described as being on the gravy train. They do a fantastic job for us. We have talked about the long hours that we work, but they often put in hours well in excess of what they are contracted to do. We should pay attention to that in the months ahead, as we sort these matters out.

Anne Snelgrove: I endorse my hon. Friend's views on staff. Has she had the opportunity to compare the salaries that we are able to give our hard-working staff with those often given to local group assistants in local councils? Those salaries are often in the mid-£30,000s; it is totally iniquitous that because of how our allowances are put together, our members of staff based in London cannot earn as much as Labour, Conservative and Liberal Democrat group assistants out in the sticks, where the cost of living is not as high.

Linda Gilroy: My hon. Friend makes her point well. I thought that she was going to make a comparison with the salaries to which our staff often move on quickly in the world outside Westminster—and rightly so. Just as there is no shortage of people queuing to become MPs, there is no shortage of people queuing to work for us in Westminster. Nevertheless, the gap between what our staff do for us and what we are able to reward them with, and what they should be able to attract, is considerable. If we are to argue that we ourselves should have automatic increases, at the very least we should say the same about our staff. If any hon. Members argue otherwise, I suggest that the system be put the other way round for them, so that they would be notified of what the salaries would be increased to—unless they intervened to have them reduced. We would see what would happen then.
	I said that I would be brief. I hope that in winding up, the Minister will join other Members in saying that MPs should be praised by the media for arguing that their hard-working staff should be fairly rewarded; the concept of being on the gravy train and inflating some personal allowance is ridiculous. The hon. Member for North Southwark and Bermondsey (Simon Hughes) clearly outlined the fact that the money does not pass anywhere near our personal pockets, and rightly so.
	I am sure that MPs' pay and associated issues will continue to be a cause of lively public debate even if we successfully implement some of the proposals that we have been discussing. Nevertheless, they will provide a much better framework around which to have that debate.

Nick Harvey: We are having an interesting debate on this issue. It is perhaps not as heated or exciting as some that we have witnessed in the past, because in some respects, there is a great deal of consensus around the House.
	To the extent that there is any tension or disagreement, it seems to cut to the question of the relationship between this sovereign House and the Government as it affects the matters before us. I should like to point out to Members the difference between the administration estimate—that is, the budget spending line that runs the House of Commons, employs the House staff, and is responsible for the fabric of the building and security—and the Members estimate, which we are discussing. The administration estimate is the property of this House. The House is responsible for it and it is administered by the House of Commons Commission. Members ask questions of the Commission about how those moneys are used. The Commission produces an annual report that Members can debate and lays before this House annually an estimate for the running of the House.
	The Members estimate, which is the budget spending line from which Members' pay and allowances are paid, is not the property of this House but is deemed to be the property of the Government and the Treasury. That, at least, is the theory. One might ask various previous Leaders of the House who have been responsible on the occasions of these debates on SSRB reports whether they felt that they had control over the Members estimate. There have been some memorable debates in which the Government have not had their way and this sovereign House has shown that it is indeed responsible for this line of spending. In reality, the Members' estimate is neither fish nor fowl—it exists in a sort of limbo. Only a Minister of the Crown can propose an increase in expenditure against it. That is why expressions of opinion, whereby other Members can make suggestions, sit alongside the motion.
	On the question of a mechanism for deciding pay, I have no problem with what the Government are doing. They have proposed that for the current year, 2007-08, the pay rise for Members should be staged in such a way that its value is only 1.9 per cent. over the course of the year. There does not appear to be any great controversy about that. Nobody has argued against it or tabled an amendment suggesting anything different, and the Front Benchers of all three parties have urged Members to support that restraint at this time. The Government have also concluded that it would be right to have conducted a review that attempts to produce a new mechanism that does not require MPs to vote annually on their pay for the coming year. There is a general consensus around the House that if a workable system can be proposed, that is a good idea that we would all welcome.
	There is a problem, however, in relation to how the Government are going about this. In my view, the report that they commissioned from the SSRB should have been a report to this House, but because of the peculiar relationship that I have described as regards the Members estimate, it was a report to the Government, which they then sat on for more than six months. We all speculated that it must be a real hot potato, and that there must be something absolutely diabolical in the report that was causing the Government terrible political angst, which meant that they had to sit on it for six months. When the report came out I read it, re-read it and read it again, and wondered what on earth had caused the Government so much difficulty. That is the first grievance I wish to log about the way in which they have done their business.
	I wish to flag up some serious misgivings about what the Government now propose. They are asking us to rescind and tear up the resolution of July 1996, which has governed how such matters are dealt with for the past 12 years. Effectively they want us to sign them a blank cheque. We have to buy a pig in a poke, leave matters with them, and they will have a review conducted by someone of their choosing who will report back to them. We all just have to relax: it will all be okay because they will see us right.
	I do not think that that is a sensible or logical way for the House to proceed. That is why there is an amendment on the Order Paper in my name, and in the names of other Members who serve with me on the Members Estimate Committee, suggesting that we ought not to rescind the existing arrangement until we have seen what the review recommends, and resolved as a sovereign House what we are going to do about it, and what the arrangements should be in future. It is simply logical not to rip up the old system before resolving what the new one will be.
	More specifically, the Government have made no suggestion about what MPs' pay rate should be for 2008-09. That is why my amendment suggests that while we are waiting for a new system to emerge, we should have what is suggested under the existing system—what the SSRB recommended—for next year. It is the only proposal on the Order Paper that makes any provision for any pay rise next year.
	During the course of the debate, we have heard from the hon. Member for Manchester, Central (Tony Lloyd) and the right hon. Member for Warley (Mr. Spellar) various rather more detailed suggestions about the task that lies before Sir John Baker—what he will do, what he will recommend and what might come back before the House in July. I have no knowledge of that. I have no particular problem with that state of affairs; I am not sulking because things have been said to those two eminent Members that have not been said to me, but it seems odd that we are being asked to sign up to this change when none of the information concerned seems to have been shared, through the usual channels or by any other means.
	Sir John is being asked to return in July with a recommendation for a new mechanism. There is no suggestion as to when this mechanism will take effect, and it was more or less hinted in response to certain interventions that he will make some sort of recommendation for a pay rise for 2008-09. However, I am puzzled by that, because if Sir John Baker comes up with a new mechanism that will operate in future, and part of that mechanism might be the creation of a new body, when will it be created? When will it start to establish the comparators, mechanisms and so on? It will clearly not be possible to do that by July, and unless the new mechanism is determined by Sir John Baker doodling a sum on a pad, there is no possibility of any proposal of a pay rise for 2008-09 by the time we have the debate in July.

John Spellar: Again, we are in danger of mixing up two elements. One is the question addressed by the SSRB of the extent to which there is a need to redress the deficiency when comparison is made with the comparators—the catch-up, in other words. The other is the question of an index by which increases would come in automatically. The question of having a body to examine what happens if such an index fails is another matter. I hope that the Deputy Leader of the House will make it clear that there is no proposal to set up a permanent SSRB to report constantly, only a body that deals with the index. There are two separate issues. The hon. Gentleman could deal with one—and even with the future index—but they are separable.

Nick Harvey: Again, I am interested in the right hon. Gentleman's comments, which sound sensible. He is a sensible man, but none of the information has so far been shared with the House. It cannot be discerned from the written terms of reference to Sir John Baker, which were published only yesterday. It was naughty to publish the terms of reference for the review after the deadline for tabling amendments for the debate. That is exceptionally bad practice.
	The long and the short of it is that the House is being asked to put its faith in the Government and allow them to drive the processes forward. Clearly, some hon. Members have far more information about what is intended than others, and it is therefore difficult for the rest of us to assess whether that is a good idea. I appeal to the Deputy Leader of the House to share with the House what Sir John Baker will be asked to do. Hon. Members have suggested, for example, that he will be asked to do one thing for the next couple of years and something else for the years thereafter. Perhaps that is true, but the terms of reference do not state that.

Michael Spicer: The hon. Gentleman is on exactly the right track and is making the point about which I tried to ask earlier. Would it not be best if the Deputy Leader of the House intervened now, because that would help matters considerably?

Nick Harvey: The sooner the matter can be clarified, the better. I tabled an amendment precisely because of the vagueness and lack of information from the Government about what is intended to happen with the review and the pay settlement for the coming year. If the Government could clear up some of those matters, it might be unnecessary to press my amendment to a Division.

John Bercow: Sir John may be an estimable individual, and an agreeable dinner companion to boot, but, on the evidence thus far, I am sceptical about the merit of his continued involvement. Given that he made a recommendation on pay that the Government have chosen not to accept this year, is it not bizarre, to put it mildly, for the Government to imagine that he will deal with the situation next year? He might again make a recommendation that they are disinclined to accept.

Nick Harvey: The hon. Gentleman makes a good point. Inviting Sir John to undertake the review is interesting, given the difficulty that the Government seemed to experience for the past six months in digesting his previous utterance. I believe that the House should control the Members estimate, as it controls the administration estimate, and that the House, not Her Majesty's Government, should decide to whom it remits such matters for review. I therefore support amendment (c) to the motion before the House, which provides that the Members Estimate Committee, as the only body in the House that could reasonably do the work, should examine the issues at the same time as the review.

John Butterfill: More than six months have passed since the SSRB report was prepared. The Government had the first draft report in May. It was sent back for further consideration—whatever that means. I believe that a second draft was sent to the Government in late May or June, and that it, too, was sent back for "further consideration". The report was then sent to the Government at the end of June or beginning of July. It would be interesting to see the correspondence, if there was any, between the Government and the SSRB during that gestation period. Perhaps we could find out through the Freedom of Information Act.

Nick Harvey: I was about to commend that to the hon. Gentleman. I, too, have heard such accounts, but I can cast no authoritative light on them. Perhaps he should become an FOI campaigner and start some inquiries into the matter.

Nicholas Winterton: I congratulate the hon. Gentleman on the excellent and relevant speech that he is making, but will he pick up the intervention that my hon. Friend the Member for West Worcestershire (Sir Michael Spicer) made? It might be helpful for the rest of the debate if the Deputy Leader of House could indicate in an intervention that she would look sympathetically on the hon. Gentleman's amendment (f), which I happen to support, as well as amendment (c), standing in the name of my right hon. Friend the Member for Penrith and The Border (David Maclean), who spoke to it very articulately.

Nick Harvey: As a point of principle, it would be desirable if the Deputy Leader of the House responded to the point that the hon. Gentleman has just raised. On a more practical level, it might be possible for any number of Labour MPs who must be detained on the estate to make an earlier departure, if those who have amendments on the Order Paper could be given the sort of satisfaction that we are looking for.
	In the case of amendment (c) to the motion before us, standing in the name of the right hon. Member for Penrith and The Border (David Maclean), the Leader of the House came tantalisingly close to giving him what he is asking for, which is simply that any report from the MEC on pay would be considered in the House as part of the debate on any report that comes to the Government from Sir John Baker. Everybody would be saved an awful lot of trouble if the Deputy Leader of the House could move that final inch, preferably right away, but otherwise at any point during this debate—but I see no sign of her taking up my invitation now.

Patrick McLoughlin: The hon. Gentleman is on to an important point. Every hon. Member finds the issue of voting on pay uncomfortable. We need to ensure that when Sir John Baker produces his report there are two possible alternatives before the House, so that we, as Members of Parliament, can take the best way forward, and take away the question that is so often raised, and with which we so often struggle. Surely it must be in the House's interest, and therefore in the Government's interest, to accept amendment (c), which I understand is signed by three members of the Commission, to which we are referring all such matters anyway.

Nick Harvey: I entirely agree with the right hon. Gentleman, and this is why. The SSRB has just sent us a detailed report covering all aspects of hon. Members' allowances—I say "just", but hon. Members will know what I mean; it actually sent it to us last July. There are some good ideas in that report and the motivation for making many of the recommendations in it was entirely laudable. Regrettably, however, some of them are slightly less practical than they might be, and have all sorts of unintended consequences that cannot possibly have occurred to the authors of the report.
	For example, having totted up what the changes in the office rental and staffing arrangements would mean for me, I discovered that I would lose £12,400 a year from my allowances. I do not believe that it was the intention that the SSRB would have that impact on anybody's budgeting, but it did. The SSRB ought to have some objectivity and independence; it commissioned people to look at things in markets out there in the real world, and produced a report with some good ideas, but also with some glaring anomalies, which the MEC will be required to consider. If that report is the only one before us when we come back in July, there is every risk of further complications, unintended consequences, inaccuracies, anomalies and other inconsistencies, which will put the House in a difficult position.
	If that report is the only proposition before us, we will again be presented, on a "take it or leave it" basis, with something that we know to be riddled with flaws. It would make far more sense if the MEC, which can see the flaws in the current proposals on allowances, were allowed to put in its tuppenceworth on the subject of a pay system for the future, because when we hold that debate, it would benefit the House to have that alternative before us. I cannot comprehend why there could conceivably be thought to be a problem with that.
	In general, there were many suggestions in the SSRB report that we can take forward. I have stressed that the MEC is only too willing to try to iron out some of the problems. We have heard from Members on both sides of the House what some of the practical problems are, and we will earnestly use our best endeavours to put them right, and to come back to the House at a later date with a workable set of proposals on which Members can take a view.

Chris Mullin: I hope that every hon. Member will support the Government's motion to keep our pay increase in line with those for the rest of the public sector. That is essential for our self-respect. If we do that, we can then look the police and other public servants in the eye and say that what is good enough for them is good enough for us. If we do not, I fear that, as a profession, we risk sinking even lower in the public's esteem than we are at the moment, and we would have only ourselves to blame.
	On the question of linkage, I think that everyone agrees that it is a matter of perennial embarrassment to most of us that we are called upon to determine our own remuneration. In speech after speech, going back more than 30 years, hon. Members have lamented that fact and called for the matter to be taken out of our hands, yet here we are, 30 years on, and it is still in our hands. The difficulty with all previous attempts to index our pay is that they were complicated and completely incomprehensible to the outside world. The 1996 motion, for example, described an increase by
	"the average percentage by which the mid-points of the Senior Civil Service pay bands having effect from 1st of April of that year have increased compared with the previous 1st of April."
	That is not very comprehensible even to us, who obviously take more interest in our pay, let alone to those in the outside world.
	Another difficulty has been the one that I mentioned in an intervention on the hon. Member for North Southwark and Bermondsey (Simon Hughes), namely that, every so often, the SSRB or its equivalent has recommended an increase that was way out of line with what was going on in the rest of the world. That has happened under Governments of all persuasions, and they have felt obliged to intervene and impose, or attempt to impose, some sanity.
	It is my contention that there is no need to look for a complicated solution when a simple one is available. So, in July 2001, in the hope of putting an end to this nonsense once and for all, I proposed that future increases be increased by the average of the annual awards to nurses, teachers, doctors and dentists. As it happens, if that had come to pass, we would all have done rather well, as those professions tend to do well under Labour Governments, although not all of them are prepared to admit it. However, my proposal was dismissed out of hand by the then Leader of the House, Robin Cook, with the result that we yet again find ourselves back in the same old mess.
	Today, my right hon. and learned Friend the Leader of the House of Commons is proposing, with the best of motives, another review. I fear, however, that after much learned deliberation, such a review is likely to saddle us with yet another unworkable solution. In an effort to avoid going round the same old track again, I tabled an amendment—which, regrettably, has not been selected—proposing to link future salary increases to the state old-age pension, thereby permanently and irrevocably linking our fortunes to those of the humblest of our constituents.

Ken Purchase: My hon. Friend mentioned his previous proposal for a pay formula that would have resulted in our pay being linked to certain professionals who have done rather well. He now suggests that our pay increases should be linked to those of pensioners. Does he believe, however, that it would be reasonable for the Government ever to forgo the right to intervene in MPs' pay, or for this House not to recognise its role as a sovereign body? In order that our pay increases, whatever the circumstances outside, should actually reflect what is politically possible rather than being linked to dentists, doctors or whomever— I hope that my hon. Friend will take this in the spirit in which it is given—we really need to understand that the Government have to govern, and they have to have the right to intervene wherever and whenever that is necessary.

Chris Mullin: I would hope that we could get ourselves into a position where the Government would not feel obliged to intervene every time; but perhaps we cannot, in which case we are doomed to go on having these debates every four years for eternity.
	I want to make it clear that I am not wedded to any particular formula. To my pleasant surprise, I found myself in general agreement with my right hon. Friend the Member for Warley (Mr. Spellar), who is no longer in his place, when he suggested a number of different alternatives: indexing to the average increase in public service wages, for example, though he lost me on the Chicago grain index. Whatever formula we alight on has to be readily comprehensible to those outside this place. It also needs to be easily defensible so that we can look our constituents in the eye, which we have not always been able to do in the past.

John Butterfill: We did once have a link with a certain grade of civil servant and it was suggested that our pay should go up automatically in line with that. The difficulty that has arisen is that there is now a basic increase for civil servants and then rewards for performance on top of it. That means that linking us to the base civil service increase, as we were last year, giving us 0.66 per cent., does not reflect the reality of the situation.

Chris Mullin: I am not in favour of our trying to identify yet again another civil service grade to which we can be linked, because it has got us into all sorts of difficulties in the past. On one occasion, I believe that the grade was abolished, so we found ourselves promptly back where we had started.
	Let me repeat that I am looking for something that is easily defensible and easily explicable to our constituents in the outside world and that will not get us back here debating the subject every three or four years as we are today. I fear that Sir John is going to come up with something—I am sure it will be independent—that either the Government will feel obliged to interfere with or will not be viewed as credible in the outside world.
	It fills me with despair to think that the first of these debates I participated in was in 1987 and that it was exactly the same as today's: everyone was lamenting the fact that we were all here again discussing our own wages and everyone had their own complex formula for sorting it out. Nevertheless, here we are, 21 years later, going through it all again. I read the debate of 1975 and there was Edward Short at the Dispatch Box, talking about a formula linked to a civil service grade—but here we are yet again. I want to see us putting a stop to all that and doing something simple and easily explicable to the outside world. When the Deputy Leader of the House concludes the debate, I would like to hear some assurance that in their evidence to the review the Government will emphasise to Sir John the need for a formula that is simple, workable, easily understood and morally defensible.

John Maples: I think that I entered the House a little later than the hon. Member for Sunderland, South (Mr. Mullin), but I remember that one of the very first debates that I attended in 1983 was about Members' pay, and exactly the same issues that have been rehearsed today were rehearsed then. We sensibly decided on that occasion to link pay to a grade in the civil service. I did not think that it was particularly ambitious to link our pay to 78 per cent. of that of a principal officer—just one above the fast-stream entry grade—but, nevertheless, it resolved the problem for quite a long period.
	I want to talk about two issues. One has had a lot of attention and the other has not, so hopefully I can shorten my speech. The one that has had a lot of attention is what the uprating mechanism should be. As the hon. Gentleman said, I personally think that it should be simple and comprehensible, not just to us but to our constituents. I would have thought that it should be something like the annual percentage increase in public sector pay. The Government are concerned that our pay must take account of their public sector pay policy, and that mechanism would. The Government are in one way or another negotiating if not setting public sector pay, and we would be one year ahead of it—or behind it, whichever way one looks at it. I believe that if our uprating on, let us say, 31 March every year were linked to the average increase in public sector pay over the previous 12 months, that would take the problem away.
	The Government, whether Labour or Conservative or anything else, must keep their hands off this matter. When they interfere, they simply make the problem worse for themselves. They lower the increases for three or four years, which they think helps. Actually, I do not think that the press care; whatever we do, they will be unhappy with us. Whether it is 1 per cent. or 10 per cent., we will get the same bad publicity. If the Government interfere to suppress annual pay increases—I hope that the Deputy Leader of the House takes this on board—they can do it for four or five years, and then we will insist on having a whacking great catch-up increase and it will look awful. Were the increase 2.5 to 3.5 per cent. a year, or whatever the general rate of increase in the public sector was, that would satisfy us and the public, and would not create these horrendous problems. Linking it to public sector pay is the way to go, but I would be happy to consider any other index that is suggested.
	I must pick up a point made by my right hon. Friend the Member for Penrith and The Border (David Maclean). This is a House of Commons matter, not a Government matter. The hon. Member for Sunderland, South said that the trouble is that the Government control the matter, but they do not. When it comes back to the House, I hope that some amendments will be tabled by Back Benchers, and that we will be allowed to vote on them. The Government do not control this; they control about 100 votes, but the rest of us can speak and vote for ourselves.
	A fair amount of remarks have been made about the erosion in our pay, and I do not need to reiterate those. Had the mechanism that we had agreed been followed, however, we would now be paid between £65,000 and £66,000 a year. Were we to continue to allow the erosion of our pay relative to other people, or to the public sector, that problem would sooner or later get so bad that it would have an effect on the sort of people who get into this place. If we want to fill it with people who are either fanatics or rich, that is the way to go, but it is not sensible. There are people who would do the job for nothing—I would be happy to present "Newsnight" for nothing—but whether they are the right people is a different question. It is not the right way of qualifying for a job. We certainly do not want to fill the place up, as we did until about 100 years ago, with people who have significant other sources of income.
	I want to turn to the second point. Once we have the uprating mechanism agreed, what is the starting point? Is it what we are paid now? Is it £66,000, £66,170 or what it would have been if we had had the uprating as agreed? Is it something different? I do not think that the study done for the Baker review was right. Comparing the skills that Members of Parliament bring to the job is not the right way to decide what they should be paid. We 646 Members constitute a huge variety of people. Some of us have enormous earning potential out of this place, and some of us do not. Some of us have professional qualifications, and others do not. But we all come here equal, and while we are here we are all equal, and we all need to be paid the same. Trying to compare the skill levels and the hours of work will not produce a satisfactory answer.
	What we ought to do is look at what other people in the public sector are paid. I made a start with the people employed by the House of Commons Commission, all five members of which have spoken in this debate. It employs just over 1,500 people, of whom 92 are paid more than Members of Parliament. I expect that all of those people are properly paid—at one stage, when I was in the Treasury, I was responsible for civil service pay and an enormous amount of attention was given to trying to get the right pay grades to recruit, retain and motivate civil servants, and I am sure that a lot of attention is paid to their salaries. But is it right that 10 people in the Department of the Official Report are paid more than us, along with 10 people in the Department of Finance and Administration, 21 people in the Clerk's Department—that might be more understandable—13 people in the Information Communications and Technology Department, two people in catering, six in the Library and nine in the Serjeant at Arms Department? There is a status issue. We are not just putting in hours of work, being social workers for our constituencies, or giving vent to our views on the great events of the day. Members of Parliament have some sort of status as well. We have to consider where that should place us on the public sector pay scale. I find it difficult to believe that my status, and that of all of us, in the public sector is less than 92 people who work for us for the House of Commons Commission.
	I have looked at one or two other areas of the public sector—I do not pretend that there is any system to the areas that I have examined. We are paid at the low end of what a lieutenant-colonel in the Army or commander in the Navy is paid. We are paid at the low end of what a police superintendent is paid. Lieutenant-colonels in the Army, commanders in the Navy and police superintendents are often—this is certainly the case in the armed forces—bright 38-year-olds who are going somewhere. Is that the right end of the pay scale for us, or should we be paid in conjunction with a higher grade?
	When we look at pay in local government, we really do find out how badly paid we are. There are 852 officers working in 34 county councils who are paid more than Members of Parliament. Our pay is the same as about the middle rate paid to what is called a third-tier manager, and the third tier does not include the chief executive. The order is chief executive, first tier, second tier, third tier. There are 1,000 officers in district councils who are paid more than us, and we are slightly higher than the top end of the second tier. The order is chief executive, first tier, second tier. Then there are the metropolitan councils, the unitaries and all the rest. Nearly 7,000 officers in local government are paid more than Members of Parliament. Is that really how we see ourselves? Is it the right place for us to be?
	There are 4,000 members of the senior civil service who are paid more than Members of Parliament. I do not agree with the methodology of the PricewaterhouseCoopers study, but I was interested by the suggestion that our comparator was a grade 1 civil servant. For those of us who go back a while, that is equivalent to the old grade 3 or grade 4 under-secretary level. The average pay of grade 1 civil servants is about £71,000 a year and their average bonus is about £10,000, so we are looking at about £80,000 a year. There is a grade 1a, at which the pay is about £10,000 or £12,000 more.
	It may be a bad idea to take a look at the pay scales of the judiciary, but let us look at the bottom end, level 7. The chairman of an employment tribunal or an immigration judge receives £98,000 a year. At level 6, a Land Registry adjudicator or the regional chairman of a mental health tribunal—we are not talking about the Court of Appeal or the High Court—is paid £117,000.
	We will all have views on where we sit on the scale, but I think we must consider where we as Members of Parliament see ourselves in relation to other people in the public sector. I very much hope that we shall be able to choose the right level in future, and I shall seek to table amendments to that effect when the issue returns to the House. I think that we should table a series of amendments suggesting levels £5,000 apart rising from £60,000 to £100,000, because I consider the right amount to be somewhere between the two. My own view is that it is in the £75,000 to £85,000 region, but I think there should be a series of amendments on which we can vote. We will take a lot of flak once, but we will settle the issue of what the base should be before whatever uprating mechanism on which we agree comes into effect.

Chris Mullin: The hon. Gentleman got off to a pretty good start, but somewhere along the line he has gone away with the fairies. I fear that if we go down the track that he is now recommending, he will get us back into exactly the sort of trouble that we have got into in the past.

John Maples: I will get us into it once. There will be one unpleasant occasion on which we settle this and then we will not have to settle it again, certainly during the hon. Gentleman's political career and mine. It is possible that the issue will return during the political careers of some of our younger colleagues, but I think it will see us out.
	If we let the editorial writers of the  Daily Mail and  The Daily Telegraph set our pay, we are done for.

John Bercow: We would be paying them.

John Maples: I am sure that none of the people who write those editorials would do the job even for the pay of the chairman of an immigration tribunal, let alone for what we get.
	I think that we must set our pay. I do not know whether the right level is this level or one considerably higher, but when we settle the uprating mechanism we need to settle the base from which that mechanism will operate. I believe that Members of Parliament should have a series of choices on what the level should be, and I am happy to go along with whatever the majority decide, but I think that we must settle it, because if we do not settle the base I shall not be happy about settling the mechanism. I do not think that it should start from the present level, but if that is the view of the majority of my colleagues when we have a vote I will obviously go along with it.
	Would this increase cost a lot of money? I do not think that it should cost the taxpayer anything at all. I would do two things in order to pay for it. First, I would abolish the ludicrous communications allowance that was introduced about a year ago, for which there is absolutely no justification. It is £10,000 per Member, which would probably handle a significant increase. Secondly, there are far too many of us. I handle a constituency of 85,000, and the boundary commission is reducing that to 65,000 by creating an extra seat in Warwickshire. It is completely and totally unnecessary. The House could function perfectly well with 100 fewer Members, which would allow us to be paid a great deal more and to have additional staffing allowances if that became necessary.

Kevan Jones: How would the hon. Gentleman pick those 100 Members?

John Maples: The hon. Gentleman should pay more attention to my speeches. I had a ten-minute Bill on this subject in which I laid out exactly how that should be done. I proposed that the boundary commissions should reduce the number over a period of time: they should do so in stages every five years instead of every 15, and reduce the number by a certain amount on each occasion. I do not have my eye on the hon. Gentleman's seat—and certainly not on my own.

Nicholas Winterton: My hon. Friend has introduced another element into the debate. I believe in being closely in touch with my constituents; that is a policy that I have had for all the 36-plus years I have been a Member of this House. Would not my hon. Friend's proposal to reduce the number of Members introduce a democratic deficit, where the close relationship between a Member and his or her constituency would be eroded?

John Maples: I do not think so, but this is not the occasion to debate that. I have instituted debates on the matter in the past, and I might try to do so again in future—and, if so, I would be happy to engage with my hon. Friend. Suffice it to say that I have 85,000 constituents and I do not think they have any difficulty in maintaining links with me.

Andrew Turner: I have 108,000.

John Maples: rose—

Peter Bottomley: If we took that Isle of Wight figure as the standard quota of voters, could we not reduce the number of Members perfectly reasonably?

John Maples: I was simply offering a way of introducing a productivity gain to finance the pay increase, which is something we demand of other people. Abolishing the communications allowance would go a long way towards addressing the problem.
	Let me conclude by reiterating my two main points. First, we need an uprating mechanism that does not involve annual, or even biannual, decisions, but that just happens automatically. The one I suggest is the average increase in public sector earnings during the previous year. Governments would have to agree to take their hands off, because although they might gain something for a year or two, they would lose it further into the future. Secondly, we have to set a base salary from which to operate, and I do not believe that the current salary is the right one, as there is a lot of catching up to do. We should set a salary that we think is right by looking at the pay of what we consider to be equivalent public sector posts. That should be done on a free vote of the House of Commons, with a range of salaries to choose from. I have given the salaries of some posts, and I think Members will be surprised to find that 7,000 local council officers are paid more than us and that the chairmen of immigration tribunals are paid almost £100,000 a year.

Andrew Dismore: I do not want to say a great deal about the salary issue. I will support the Government's expression of opinion, but I was very taken by the remarks of my right hon. Friend the Member for Warley (Mr. Spellar) and the right hon. Member for Penrith and The Border (David Maclean). It is difficult to find a comparator for us, because we have a unique job. No other job in the world is like it, in terms of the hours we work or the demands on us. To say that we are in charge of our own work load is to misunderstand completely our situation.
	I make the point about us being unique because it is one of the reasons why we have problems with the Senior Salaries Review Body's examination of our allowances and pay. It is also why I agree with the right hon. Member for Penrith and The Border that the Members Estimate Committee should address this matter. The only people who truly understand our job are other MPs. For other MPs to look at some of the difficulties involved would be a good way forward. I also urge the House to look at the amendment in the name of the hon. Member for Cities of London and Westminster (Mr. Field) on the London supplement.
	I want to focus on London issues. As chair of the London Labour MPs, I put a detailed submission to the SSRB on our behalf. It addressed allowances primarily, but the supplement is also an important issue. According to Library figures of a couple of years ago, the differential between the rates of pay in London and the rest of the country is more than 22 per cent. It is worth noting that the differential in London weighting premiums was also higher.
	My main concern is the lack of reflection in the IEP of any London element. It is self-evident that office rates in London and some other big cities are far higher than elsewhere in the country. I got the Library to do an analysis of that, which I submitted to the SSRB. The differential between London and other parts of the countries can be four times as much. Consequently, London MPs generally end up with poorer quality or much smaller premises than MPs in the rest of the country. Alternatively, they end up subsidising the cost out of their own pocket, from elsewhere in the allowances or sometimes out of party funds. A number of MPs have found that they have been unable to maintain their constituency office and have closed it down with a view to moving their staff back to Westminster. Other, newer Members never opened an office in the first place simply because they could not afford the rents.
	This is not just a question of the rents, because a lot of the office running costs incurred in the constituency are met on the parliamentary estate. For example, the telephone bill for most constituency offices is substantial, but it is paid for free if the phone calls are made from Westminster. We ought to try to incentivise Members to have a constituency office. I do not want a system whereby those who decide not to have an office are penalised, but the present system has the perverse incentive of pushing people back on to the parliamentary estate, because if one does not spend one's IEP on rent, one can spend it on other things, such as an annual report or more staff. The net result is that those who have a constituency office end up rather worse off.
	A system based on a square footage allowance is the way forward, but the SSRB's proposals are far too complicated. It is therefore right that the matter should be referred to the MEC for consideration as to how the system could be operated. It is important that our system reflects office rents separately from the remainder of the IEP expenditure and reflects the fact that rents differ around the country. I hope that the MEC examines the issue in a way that reflects those two important factors.
	I am pleased both that the staffing allowance is going to be increased in respect of additional numbers of staff and that an element of London weighting will be involved. It is bizarre that London weighting was effectively abolished last time. That was grossly unfair to our staff who work in London compared with those who work elsewhere in the country. The net result was that staff ended up being paid less than the market rate—that is inevitable even on the new rates that are being proposed—or that Members employed fewer staff to meet the higher rate or our staff ended up not being looked after as well as they should have been.
	There should be a London allowance to reflect realities in the labour market, but it should be payable to non-London MPs' staff who work at the palace as well as to London MPs' staff who work both at Westminster and in their constituency. It should also reflect the differentials in work load that some of us face, particularly those of us who represent some of the inner-city constituencies. As a result of the impact of multiple deprivation, such constituencies tend to generate significantly higher levels of complex case load than elsewhere.
	I get very cross when people talk about how generous our pension scheme is. It is generous for people who work in the House for their full working life and who do not come here with prior pension arrangements. I had worked in the private sector for some 20 years prior to coming here, and I had built up a quite substantial pension pot of my own, despite the fact that Equitable Life victimised me somewhat and took a large chunk of it away. I have calculated that the byzantine way in which the retained benefits system works means that if I am able to complete service up to the age of 65, when I retire I will have paid seven eighths of my pension and only one eighth of it will have come by way of an employer's contribution. Most pension schemes in the outside world would be far more generous to their employees than that, which is why we need to do something serious about the issue of retained benefits. The arrangements are unfair to those who come here having worked in the outside world and having built up pension arrangements elsewhere. The way in which our pensions are effectively taken off us to subsidise the House's pension scheme is peculiar.
	Overall, the Government's proposals are fair and reasonable. It is appropriate that the MEC examines the allowance.

Stephen Hammond: The hon. Gentleman has been putting the case for London and London MPs. He just said that he supports the Government's case for putting various recommendations to the MEC. Does he therefore support the proposal that recommendation 29, on the London supplement, should also go to the MEC?

Andrew Dismore: The hon. Gentleman took the words right out of my mouth. That was exactly what I was about to say. I hope that the Government will accept amendment (a), which would mean that the London supplement would be considered by the MEC, too. I hope that they will consider the proposal put forward by the right hon. Member for Penrith and The Border and will come forward with alternative mechanisms to reflect the unique nature of our job. I do not think that anything in the outside world can reflect that, as we have seen from all the SSRB studies and other contributory research. Only we understand the way in which we work. If we had two reports to consider simultaneously—one complied objectively by someone from the outside world and the other compiled by those with experience of the House—that synthesis might provide the answer for which we have been searching for so long.

John Butterfill: It will not surprise right hon. and hon. Members that I shall start by speaking principally about the parliamentary contributory pension fund.
	I want to place on record my thanks to the Prime Minister for sending me an advance copy of the report, although I received it only a week before everybody else. Because I then had to plough through some extremely complex detail about the recommendations on the pension fund and the Watson Wyatt report, it would have been helpful, and I would have been able to make an even better contribution than I am able to make today, if, as I had requested, I had been sent the embargoed copy of the report some weeks before that. That would have allowed me, the staff in the pensions unit and the Government Actuary to put together a more considered response than that which I am able to give. In the future, if I can be trusted with an advance copy, that would make it much easier for us all to have a better debate on the subject.
	Unfortunately, as I have already said in an intervention, it appears that there are many factual errors in the Watson Wyatt report. Perhaps I should deal with them first, as it is important to put them on the record. In volume 2, on page 76, in paragraph 2.18, the Watson Wyatt report gives its view on how the deficit in the scheme arose. It states that it arose
	"as a result of a divergence in the experience of the PCPF since the previous valuation (primarily due to lower investment returns than expected) and changes to the assumptions"—
	about future benefits and so on. That is wholly inaccurate and is contradicted by paragraph 2.19 and the graph that accompanies it, which is chart 2.1. The graph shows that successive Governments took contributions holidays between 1989 and 2003. Those holidays were absolutely massive and, in the opinion of the Government Actuary, more than contributed to the current deficit. Indeed, at the time of the Government Actuary's last evaluation, he concluded that had it not been for the contributions holidays, the PCPF would have been £5 million in surplus.
	The record needs to be corrected on the reasons why the scheme is in deficit. The Government, on behalf of the taxpayer, have been failing to make their correct and recommended contribution to the scheme. Even chart 2.1, it seems to me, contains an inaccuracy. My recollection from when I came to the House in 1983—no doubt you, too, will remember this, Mr. Deputy Speaker—is that we then paid 9 per cent. for a one-sixtieth scheme. It might be that the off-blue section of the chart, which is supposed to represent our contributions, is also inaccurate. I have not had the opportunity to check that in detail while I have been speaking.  [ Interruption. ] I hear several hon. Members confirm that that is a fact.
	Messrs. Watson Wyatt also say, on page 91 of volume 2, that the build-up of benefits above the two-thirds maximum post age 65 contributes significantly to the costs. It appears that no one has told them that in 1989 we abolished Members' right to accumulate post-65, apart from those elected before 1 June 1989. The overwhelming majority of hon. Members, therefore, do not have the right to accumulate past 65, and the remaining few who do will be phased out. However, that has not been taken into account in the calculations.
	The next error appears in paragraph 2.3 on page 72. The final bullet point of that paragraph states:
	"Members can commence receipt of their pension whilst remaining an MP".
	That would be great news if it were true, but of course it is wholly untrue. Members cannot draw their pension while remaining an MP, and have never been able to do so. If it were true, the costs of the scheme would be greatly increased, but it is not true.
	Indeed, in light of the Pensions Act 2004, we had to make some special arrangements for those Members aged 75 and over, of whom there are a handful. The Act meant that they were required to take their tax-free lump sum at the age of 75 and commence drawing their pension, as otherwise they would lose their right to a tax-free lump sum. The special arrangement that had to be made for them was that they would be deemed to be drawing their pension from the age of 75, even though they would not actually receive it. However, they were able to take the lump sum, with the rest being held in escrow, so to speak: even though they were not getting the money, they did get increases in line with inflation as though they were getting it, so that the final pension level was correct when they eventually started to draw it. Again, I am afraid that Messrs. Watson Wyatt are labouring under a number of misapprehensions about elements that greatly affect their assessment of the scheme's cost.
	Lastly, I invite Members to turn to page 71 of volume 2. Table 2.1 repeats incorrect assumptions by stating that the normal retirement age is 65,
	"although members can continue to build up benefits after that age".
	Only a few Members can do that, but the assumption is that all can. The table also says that the maximum benefit is two thirds of pensionable salary,
	"although accrual can recommence if the member is older than 65"—
	another repetition of the same erroneous assumption. That seems to be quite a serious series of errors in the report's assumptions.

Ronnie Campbell: Does the hon. Gentleman know who has been advising the people who have drawn up this report on our pensions?

John Butterfill: I am afraid that I assume that it was the Treasury. I am by no means certain of that but, if it was, one would be entitled to be rather worried about what the Treasury knows about our pension scheme. Again, a number of the basic assumptions on which the calculations are based are erroneous.

Kevan Jones: Does the hon. Gentleman agree that the recommendation on trying to cap the Government contribution to the scheme is based on completely wrong information?

John Butterfill: I shall refer to that later, if time permits, but it is important to get the facts on the record. Watson Wyatt apparently bases its calculations on the accrual of one year's pension for an MP aged 54 who serves a further two terms, which totals nine years, and who draws a pension at the age of 65. That is by no means a typical length of service for an MP. All those things mean that some of the conclusions are wrong. The report also does not take any account of the effect of retained benefits. As a number of hon. Members have said, retained benefits substantially inhibit the ability of Members to draw money from the pension scheme. My staff—in conjunction, I think, with the Government Actuary—estimate that that could overstate the pension cost by between 3 and 5 per cent., which is rather a lot. It has not taken into account Members who reach the maximum benefit limit of two thirds of pay. Again, that could overstate the pension cost by another 1 per cent.
	Watson Wyatt has not made any allowance for the phasing out of the early retirement provisions. The press and the general public, who are informed by the press, do not remember that on 4 November 2004 we voted to end our generous early retirement arrangements; they were to be phased out from 2009. The Government were asking civil servants and all those in the public sector to go down a similar route, although they proposed that the date for those groups be 2013. Faced with the threat of strikes across the country, the Government backed down. We made that gesture, thinking that we were leading the way and showing that we were not frightened of making the change. We thought that we would get some credit for that, but we did not—not with the public, and not with Messrs. Watson Wyatt.

David Anderson: Did not the Government put that proposal to employees across the public sector in 2004 because of the same problem that the hon. Gentleman said affected us—contribution holidays had been taken by public and private sector employers over a number of years?

John Butterfill: The situation is that the right to retire early exists in all other areas of the public service, but it is not available to Members of Parliament.

John Gummer: If all the mistakes are so obvious why, when Watson Wyatt completed its first draft, did it not go through the facts with the one set of people who ought to know them—my hon. Friend and his team in the House of Commons? Why were the factual details not discussed with him?

John Butterfill: I share my right hon. Friend's puzzlement. I can only hope that if Messrs. Watson Wyatt or some other distinguished firm of actuaries was asked to perform a similar operation in future, there would be such discussions. Then we could avoid difficulties. The effect of not allowing for the fact that we have no early retirement provisions is to overstate the pension cost by approximately another 1 per cent. The percentage points are really starting to add up.
	Watson Wyatt assumes in its calculations that MPs' salaries will increase by an average of 4.5 per cent. per annum. I wonder where that assumption came from, given that, since 2002, MPs' salaries have increased by about half that—by about 2.25 per cent. a year on average, and by well below inflation. I do not entirely understand—or understand at all—why Messrs. Watson Wyatt should assume an annual increase of 4.5 per cent. when making their valuations.
	On that basis, one must look with a fair degree of scepticism at the recommendations and assumptions that Watson Wyatt have made. They have also made wild errors in relation to the costs of schemes for our comparators. With reference to public sector comparators, Watson Wyatt say that the cost of the police scheme is 11 per cent. The police current employer contribution is 24.6 per cent. and police throughout the country are complaining that it is not enough, and that because of the high cost of their pension scheme, they will have to get huge subsidies from their local authorities to be able to maintain their present activity.
	That demonstrates once again that the methodology and basic assumptions of Watson Wyatt are critical in this. They seem to have based their costs on a similar 1/60th accrual, on the same basis as in the calculation for an MP with the nine years' potential service. However, a chief superintendent is likely to have a career of more than 20 years. That would result in an accrual rate of 1/30th for each year of service between 20 and 30 years. When Watson Wyatt look at our comparators, they seem to get it seriously wrong. Some of the other examples are not quite so badly wrong, but it does not give one a huge degree of confidence in the recommendations that they subsequently draw from the assumptions that they have made.
	It is important to get it on the record that the parliamentary contributory pension fund—PCPF—is rather a good scheme. It is similar to a number of others in the public sector, but despite what frequently appears in the press, the cash benefits that are provided under the PCPF are not a king's ransom. The average pension in payment to former Members in the last Government Actuary Department's valuation in 2005, excluding what was being paid to widows, was £15,700 per annum, yet if one looks at what is published in the papers, they give the impression that MPs have to do only one or two terms here to be on £25,000 a year. The average pension in payment is £15,700 for Members who have done many more years than that.
	The GAD estimates that the average pension currently in payment is around £17,000. That takes account of the pension increases in the past two years and the level of pension of Members who will have retired following the election. The average pension built up to date by serving Members is £20,100. All these figures, which are comfortable—much more so than the pensions of many of our constituents—are nothing like the allegations of gold-plated pensions that appear in the national press.
	The last triennial valuation of the scheme costs by the Government Actuary's Department increased the Exchequer contribution to 26.8 per cent. of Members' salaries. It is being put about that that is the cost of the scheme, but it is not. It is the cost of the scheme, including the amount that the Government now have to put in to make up for the 15 years under successive Governments of contributions holidays that were taken, which created the current deficit of about £49 million.

Ronnie Campbell: Can the hon. Gentleman tell the House how many former Members are on the full-term pension?

John Butterfill: I do not have the figures to hand, but it is a very small number. Only a minority of Members ever go the full distance. The average Member comes in at the age of 42 and leaves at the age of about 52. Very few Members will ever get to the full final salary, and that will not change much because of boundary changes and Members losing their seats. The media think that we backdated the fortieths, but we did not. I would still have to work in the House for 31.5 years to get a full pension. Only those Members who have come into the House most recently since we moved to the fortieths arrangement will not have to work more than 27 years.
	As I was saying, the 26.8 per cent. headline figure of contributions for us is misleading, because it includes 8.7 per cent., which is the sum per annum that is allowed to make up the estimated deficit of £49.5 million, which has arisen entirely from the contribution holidays. That is not helped by the abolition of the tax relief, which the Government implemented early in their life. Our scheme has been affected by that just as much as anybody else's.
	That leaves an actual Exchequer contribution for future service of about 18.1 per cent., which is broadly similar to private sector schemes and other public sector schemes, which can quite often be more. For example, the civil service scheme is costing about 19 per cent. So we are not out of line with either the private sector or the public sector.
	Ours is an unusual scheme in a number of respects. First, ours is virtually the only public sector scheme that is funded by Members' contributions, investment returns—because ours is fully invested—and an Exchequer contribution. So it is unique in that. The other area in which it is unique is that it is not a final salary scheme. It is a scheme based on the salary of the lowliest Back Bencher at the time of retirement. It is true that Ministers or office holders have an additional amount of income and they pay 10 per cent. of that addition into a special account, which then effectively buys them additional years—that is the way it tends to operate—but that applies only for the period, often limited, when hon. Members are Ministers or office holders. They can be very brief careers indeed in some cases. The general public think that Ministers will retire on a pension that is two thirds of their ministerial salary. They do not and they will not, with the exception of the Prime Minister, Mr. Speaker, and, until recently, the Lord Chancellor, although that is now being reviewed. Everybody else retires with a pension that is based upon that of the ordinary Back Bencher. That is unique. When everyone outside says, "Oh, but you are on a final salary scheme," they expect us to have a scheme that is based on our peak earnings in this place, but that is not the case.
	If an MP—even those who have elected to build up at a fortieth rate, which is the newer people coming into this House—was to serve 15 years, which is rather more than the average, they would be entitled to a pension of only £22,500 compared with the enormous figures that are estimated by the media, who are extraordinarily badly informed on these matters.
	Earlier, I touched on the problem of retained benefits. Those who had pensionable careers before they came to the House are not entitled to their full parliamentary contributory pension fund pension because of the restrictions imposed, although they could go back to a 1/60th scheme, which is one of the recommendations in the SSRB report. Even as we are, MPs will have paid a higher contribution rate, at 10 per cent., than that made by almost all other employees in the private and public sectors. Indeed, executives in the private sector typically pay less than 6 per cent. for far more generous schemes than are available to us.
	I turn to the report's recommendations. Recommendation 8 relates to the deficit and says that the Government contribution should be limited to 20 per cent. of the payroll. I do not disagree with that, but the Government are suggesting that if they go beyond that, we should either have a full review or any increase in costs should be shared equally between Members and the Government. For the most part, that pattern does not exist outside the House; if there is an agreement that an increase will be jointly funded, it is normally according to the same ratio—for us, that would be 20:10, or two thirds for the Government and one third for us.
	Recommendation 6 is about retained benefits, and I am happy about it because it provides for an arrangement under which reduced contributions would be payable by those who could not get a full pension. That seems fair; at the moment, people are paying quite a lot of money for something that they cannot get. The review body recommends that any additional cost should be at the Government's expense, because they have been gaining from the contributions.
	The Government now suggest in the resolutions that the additional cost should be funded by other savings made by scheme trustees. It is true that we propose to make savings, as we have done before—as we did in respect of early retirement and the abolition of the public sector transfer club. We are now considering the problem of early retirement due to ill health, and think that some of the rules on what constitutes ill health need to be tightened. The Government have suggested that the two things be linked, but I personally do not think that appropriate. The trustees started to do that under their own steam. It is likely, in fact, that the savings made will cover the cost, but I am not sure that they should then immediately be grabbed by the Government so that they can avoid complying with the SSRB recommendation.
	Finally, the Government ask the trustees to consider a whole range of alternatives to the current arrangements. Those include our going to a defined-contribution scheme as opposed to a defined-benefit scheme, and going to a career-average scheme. The latter would not make much difference in our case as we are already on a flat level, linked to the salaries of Back Benchers; we do not have the steep incline that occurs elsewhere.
	The Government also suggest that we should consider ways of sharing the costs. The trustees are perfectly happy to consider all those proposals and come up with ideas on how they could be implemented. However, the proposals are not without their problems. For example, have Watson Wyatt told the Government that if we closed down the current scheme to new entrants and said that they would all have to be on a money-purchase scheme, there would be substantial one-off costs related to the funding of the existing scheme, because no new money would be coming in from new Members? We will need to discuss such issues in future. We will consider them; we are always ready to do so, although it would have been nice if we had been able to, together with the Government Actuary, somewhat earlier.

David Anderson: The speech by the hon. Member for Bournemouth, West (Sir John Butterfill) showed how the debate has gone today, with people of massive experience across the House speaking very seriously about very serious issues. I do not have the experience that he has in the matters that he discussed, but I do have the experience of being involved as a trade union activist and negotiator for the best part of four decades. Going right back to the early 1970s, I was involved in a national strike, as were some of my hon. Friends sitting in front of me. In 1972, miners were getting paid the paltry sum of £26 a week; we went on strike and ended up with the fantastic sum of £35 a week. I go from that experience to the early 2000s, when I was involved in the negotiations on the "Agenda for Change", which covered 1.5 million workers in the health service, and single status in local government, which covered 1 million workers. I would therefore argue that I have, if not expertise, some experience in this area.
	Throughout all those years, I have never seen a pay round so badly handled by a Government. Without a doubt, the Treasury has had its fingerprints over all the public sector pay deals this year, so that we have ended up in the situation in which we find ourselves, both as public servants and as representatives of millions of public servants outside. Nurses should have been given the pay that they were due, because they were covered by a pay review body, as were prison officers, who did not get what they were due either, and ultimately ended up going out on strike; now they are facing legal challenges in this House. Obviously, as a former miner I do not have a lot of time for the police, given the history between us, but on a point of principle they should have been given what their pay review body said that they were entitled to.
	The key thing about pay review bodies is that they were not settled on by some sort of whim, but mainly to try to avert or resolve disputes, and they have been very successful in that. They should have been respected, but they have not been. The sad thing about where we are today is that our pay review body should be respected, but because of how the Treasury has handled the situation in the past nine months, we cannot legitimately say that we want our piece of the cake if our constituents—our fellow public servants—are denied their share of it. We therefore have no option other than to agree to the Government's position on the 1.9 per cent.
	We need to learn a lesson from this—that pay review bodies and deals must mean something. We must have a mechanism that works, but it must be simple, too. My blood ran cold when the right hon. Member for Penrith and The Border (David Maclean), in a very good speech, talked about job evaluation and comparators. When he said that we should look at responsibility, but not at work load or hours worked, I was taken back to 10 years of knocking my head against a brick wall trying to implement the single status agreement in local government, when the very same things were said, and where we have ended up with ordinary men and women facing court cases because they cannot get agreement on equal pay, and suchlike. We need a very simple mechanism, and it is not beyond the wit of people in this Chamber to achieve that.
	I ask my Front-Bench colleagues to listen to what the people on the Members Estimate Committee have said and work with them, because, as was clearly shown by the hon. Member for Bournemouth, West, they have an element of expertise that the so-called experts have not shown. We are where we are, and we need to get away from it; part of that is about involving the people whom we entrust with looking after our own interests.

Helen Goodman: We have had a very good debate, in which we have seen how immensely complex the issues and systems are in connection with determining MPs' pay and allowances. However, I am still not clear about what system was used by the people of Weymouth in 1463, when they decided to pay their Member of Parliament 500 mackerel.
	My right hon. and learned Friend the Leader of the House began by setting out the four key principles that underpin the Government's approach: MPs should be properly paid for the valuable work that they do; they should be properly reimbursed for the costs of fulfilling their responsibilities; like others paid from the public purse, they should share the same discipline when it comes to pay rises; and in future, MPs should not vote on their own pay. Throughout the House, there has been a consensus on those four principles.

Nicholas Winterton: Although I believe that this House can and should always set an example, it is wrong to suggest that we are setting an example in this year alone; we have been setting an example in our pay since 2002, because our increases in that period have fallen below average earnings, below the retail price index and below inflation. We are happy to set an example, but for how many years can we do so without making the life of MPs, given the work that they do, extremely difficult?

Helen Goodman: What the hon. Gentleman says is born of his long experience, but I would draw a distinction between the Government's proposals for the system and the upshot of a formula that everyone agrees has not worked satisfactorily in recent years.
	The right hon. Member for Maidenhead (Mrs. May) made an extremely sensible speech this afternoon, and we are all grateful to her for her bravery in tackling the media coverage of this issue. She emphasised the importance of getting the timetable right, and that was also referred to by other hon. Members. I would like to restate and re-emphasise the position on the timetable for this year. As the written ministerial statement said, Sir John Baker has been charged with reporting back to the Prime Minister before the end of May. That will give us two months to consider the report, to consult and to table motions in the House, so that hon. Members can think about the process and vote on where we go from here.

Nick Harvey: Will the hon. Lady confirm whether it is possible for the system emerging from Baker's report to make a pay award for 2008-09? At the moment, only my amendment (f) provides anything for 2008-09. Will she say whether her proposal can make an award for 2008-09?

Helen Goodman: Yes. Our objective is that Baker will report, and we will then take decisions on what he proposes, which should be an appropriate independent mechanism and comparators. We will vote on those proposals. It should not, therefore, be necessary to have separate votes on numbers, as we are doing this afternoon. The numbers for 2008-09 should come into immediate effect on the basis of the decisions about the mechanisms and the comparators; they will flow from that, and be effective for 2008 and 2009.

Theresa May: The issue of timetabling is important. The hon. Lady said that the Baker review would be given to the Prime Minister before the end of May, and that he or the Government will then consult on that review and table motions. Who will the Government consult, and will they undertake to publish the Baker review as soon as the Prime Minister receives it, so that Members can see it in its entirety before the Government have the opportunity to do some behind-the-scenes deal?

Helen Goodman: I am sorry if I was not absolutely clear. We will publish the report so that all hon. Members can reach a view—

Christopher Chope: When? When?

Helen Goodman: We will publish the report after we have received it. We will give ample time for all hon. Members to make their views known.

John Maples: Will the House be able to reach a conclusion on the matter before the summer recess?

Helen Goodman: Yes.
	My hon. Friend the Member for Manchester, Central (Tony Lloyd) emphasised the value of consistency and the great importance that everybody places on getting the mechanism right when we make decisions this summer.
	The hon. Member for North Southwark and Bermondsey (Simon Hughes) spoke of the importance of independence and genuine openness. All hon. Members agree with that, and that is why we are setting up the review by Sir John Baker, which will consider the mechanism for determining pay. I hope that my response to the hon. Member for North Devon (Nick Harvey) about the way in which decisions on the comparators and the mechanisms will determine the numbers for 2008-09 tackled the main concerns that the hon. Member for North Southwark and Bermondsey expressed. He also mentioned the importance of there being no further delay.

Michael Spicer: Will the hon. Lady give way?

Helen Goodman: I am sorry, but other hon. Members have raised many issues, which I want to address.
	We are all grateful to my right hon. Friend the Member for Warley (Mr. Spellar) for his work as chairman of the advisory panel on Members' allowances. It was evident how clearly he understands the issues. He made it clear that we do not envisage a permanently sitting SSRB, and that we would move back to examining mechanisms if the comparators collapsed, as the previous one did.
	As has already been said, the right hon. Member for Penrith and The Border (David Maclean) is a distinguished and experienced member of the Members Estimate Committee and we are all grateful to him for his work. He asked about the involvement of the Members Estimate Committee and stressed its importance, which we accept. The Leader of the House would welcome the Members Estimate Committee producing and publishing a memorandum for the Baker review. Of course, after Sir John's review has reported, the MEC can make its further views clear to the House, and individual members of that Committee, like all other hon. Members, will be free to table any amendments to Sir John's proposals that they believe appropriate.
	My hon. Friend the Member for Plymouth, Sutton (Linda Gilroy) spoke about the important work of our staff and the importance of paying them properly. Let me remind her that all hon. Members are already required to review the pay of their staff every year. However, I am sure that all hon. Members agreed with her point.

Linda Gilroy: I sought clarification of whether, by accepting today's proposals for the staff allowance, we could also refer automatic increases for staff to the MEC for consideration.

Helen Goodman: I understand my hon. Friend's point, and she is, of course, free to make representations to the MEC about that, if she wishes.
	The hon. Member for North Devon spoke to his amendment (f) to the motion before us, which proposes that we stay with the existing system until a new system is put in place. I hope that I have explained to him why we do not believe that to be necessary. We are proposing to remove the current system as an earnest of our intent to achieve the timetable that we have promised this afternoon. Furthermore, we do not believe it right to vote on the numbers for years two and three beyond the current financial year, which is what his amendment would do.
	The hon. Member for Stratford-on-Avon (Mr. Maples) suggested that it would be possible to align hon. Members' pay with public sector workers and that that would necessarily be in line with the Government's policies on public sector pay and inflation. He is perfectly free to put that perspective to the Baker review, and I am sure that it will be taken into account.

Chris Mullin: My hon. Friend has missed me out. I wanted her to make it clear to Sir John Baker that we need a formula that is simple and readily understandable by our constituents outside this place, rather than the arcane formulae that we were saddled with in the past. Does she remember that?

Helen Goodman: I am very sorry; I did not intend any rudeness towards my hon. Friend, who is a pioneer in the field. I am sure that Sir John Baker will be made fully aware of his remarks this afternoon.
	My hon. Friend the Member for Hendon (Mr. Dismore) spoke about the issues facing London Members. I would point out that implementing the SSRB's proposals for London Members would mean that they would receive an increase in their salaries of 2.9 per cent.— way beyond what is acceptable in the public sector.

Stephen Hammond: Will the Deputy Leader of the House give way?

Helen Goodman: No, I will not, because there is no time.
	The London supplement is part of taxable pay, and so is completely different from all the other allowances, which are reimbursements for costs.
	The hon. Member for Bournemouth, West (Sir John Butterfill) spoke as chair of the trustees of the parliamentary contributory pension fund. He displayed his excellent grasp and fantastic understanding of the PCPF. He does not receive many thanks for all the work that he does on that, but we are all most grateful to him. I note that he supports the principles outlined in the Government's motions.
	We also heard from my hon. Friend the Member for Blaydon (Mr. Anderson).
	A major theme of this afternoon's debate has been the importance of trust in our democratic institutions, and in this House in particular. My right hon. and learned Friend the Leader of the House began by saying that MPs should be properly remunerated for the valuable work that they do. As Lloyd George said when introducing MPs' salaries in 1911:
	"It is a demand from the democracy"
	that voters have
	"an unlimited choice to pick the people who will suit them best."
	It is also important that we provide, through the allowance system, adequate resources for hon. Members to do their jobs properly—and that that is seen to be separate from remuneration.
	Finally, it is vital that the public should have confidence in the decisions that we take. The motions before the House in the name of my right hon. and learned Friend are designed to achieve that, by setting a pay increase for this year in line with what key public sector workers are receiving, and by establishing for the future a system for deciding pay that is fully transparent and independent. This issue is not one of narrow party interest or the authority of the Government; rather, it is a matter of the integrity of the House, and the trust and respect that our fellow citizens can place in it. It is for that reason that I urge all hon. Members to support the motion in the name of my right hon. and learned Friend the Leader of the House.

Mr. Speaker: Amendments (f) and (g) to the motion before the House are not being moved. Amendment (d) thereto therefore falls, as does amendment (a) to the second motion, on Members' Salaries. Does any hon. Member wish formally to move amendment (c) to the first motion, on Members' Salaries (Expression of Opinion)?

David Maclean: In view of the firm commitment by the Leader of the House that she and the Government would welcome the Members Estimate Committee producing its own memorandum or report, which could be published for consideration in due course, I do not wish to move amendment (c), Mr. Speaker, and I hope that other colleagues will follow my line.
	 Resolved,
	That, in the opinion of this House, the system for determining the salaries of Members of Parliament should be reviewed, in particular with a view to removing the need for final decisions on salaries to be subject to approval by this House; and that—
	(1) the yearly rate for salaries of Members of this House, including the additional salaries of chairmen of select and general committees, should be increased (in addition to the increase of 0.66 per cent. provided for in respect of the year starting with 1st April 2007 under the resolution of 10th July 1996 relating to Members' Salaries (No. 2))—
	(a) with effect from 1st April 2007, by 0.84 per cent. of the rate as it stood on 31st March 2007, and
	(b) with effect from 1st November 2007, by a further 1.06 per cent. of the rate as it stood on 31st March 2007;
	(2) from 31st March 2008, the resolution of 10th July 1996 relating to Members' Salaries (No. 2) should cease to have effect.
	 It being after Five o'clock, Mr. Speaker put the  remaining  Questions necessary to dispose of proceedings, pursuant to Order [22 January].

MEMBERS' SALARIES

Queen's recommendation having been signified—
	 Ordered,
	That the following provision shall be made with respect to the salaries of Members of this House—
	(1) the yearly rate for salaries of Members of this House, including the additional salaries of chairmen of select and general committees, shall be increased (in addition to the increase of 0.66 per cent. provided for in respect of the year starting with 1st April 2007 under the resolution of 10th July 1996 relating to Members' Salaries (No. 2))—
	(a) with effect from 1st April 2007, by 0.84 per cent. of the rate as it stood on 31st March 2007, and
	(b) with effect from 1st November 2007, by a further 1.06 per cent. of the rate as it stood on 31st March 2007;
	(2) from 31st March 2008, the resolution of 10th July 1996 relating to Members' Salaries (No. 2) shall cease to have effect. — [Helen Goodman.]

PARLIAMENTARY PENSIONS

Resolved,
	That this House endorses in principle Recommendations 7, 8 and 9 of the report of the Review Body on Senior Salaries on parliamentary pay, pensions and allowances (Cm 7270-I) a copy of which was laid before this House on 16th January, relating to the Parliamentary Pension Scheme, and endorses the change to the Scheme rules outlined in Recommendation 6 if it can be implemented in conjunction with changes identified by the Trustees which produce sufficient offsetting savings to be cost neutral. — [Helen Goodman.]

MEMBERS' ALLOWANCES

Resolved,
	That this House notes the recommendations made in Chapter 5 of the report of the Review Body on Senior Salaries on parliamentary pay, pensions and allowances (Cm 7270-I) a copy of which was laid before this House on 16th January; and is of the opinion that—
	(1) recommendations 20-22 relating to an increase in staffing allowance should be implemented, subject to the decisions of the Members Estimate Committee with regard to their timing and administration;
	(2) recommendations 17-19, 23-28, 30 and 31 (relating to reimbursement of unreceipted expenditure, audit, central funding of constituency office costs, Incidental Expenses Provision, partners' travel, Communications Allowance, Resettlement Grant, Winding-up Allowance, and nomenclature of allowances) be referred to the Members Estimate Committee for further consideration following consultation with the Advisory Panel on Members Allowances. — [  Helen Goodman.]

DEFENCE AVIATION REPAIR AGENCY

Motion made, and Question proposed, That this House do now adjourn. —[Mr.  Watson .]

Gordon Banks: I always have this effect on people, Mr. Speaker. I can empty a room at 100 paces. Thank you for allowing me this opportunity to debate this issue, which is so important to my constituency and—dare I say it?—to the Ministry of Defence. I am also glad that the Minister for the Armed Forces is in his place for this important debate.
	It might be helpful to the House if I provide a little background to this issue, and explain why I feel that it is necessary for us to debate the ins and outs of the Government's position and of the proposal that has been placed on the table by the trade unions. The Defence Aviation Repair Agency—more commonly known by the acronym DARA—has a base in Almondbank that provides maintenance and repair facilities for the UK's military helicopter fleet. The House will forgive me if I focus my remarks on Almondbank—although the issue also affects Fleetlands. Some of my hon. Friends have also expressed their wish to contribute to the debate. I thank them for giving me prior notice of that.
	I cannot speak highly enough of the 300 or so dedicated and skilled members of the work force at Almondbank. They have met or exceeded every target set by the Ministry of Defence, streamlined output and reduced downtime. We should not lose sight of those important facts. Almondbank is also important in terms of its ability to train and to skill apprentices. DARA Almondbank has forged some very strong links with nearby Perth college to encourage our young people to learn a trade. Those young people have learned, and are learning today, the skills necessary to compete in this industry. The Government have a duty of responsibility to those young people who see their futures within DARA.
	I attended a reception at No. 10 Downing street before Christmas, which brought together some of the finest young people involved in apprenticeships from around the UK. Many of those individuals were employed in the private sector, which made me think that surely the Government should be fighting to create and retain those skills in the public sector. We have the skills at Almondbank and we are faced with a choice of whether to keep them in the public sector or risk losing them to the private sector—or to even lower skilled employment if those people are not content in the private sector.
	I know that the Government are committed to protecting the current skills base and to developing new skills in the form of modern apprenticeships, and although devolved issues come into play in this case, I would hope that the MOD will take the UK's long-term objectives into account when deciding on the future of DARA. DARA's work is world renowned and remains a credit to Perthshire, to Scotland and, indeed, to the UK.

Sarah McCarthy-Fry: As my hon. Friend mentioned earlier, this issue is also relevant to DARA in Fleetlands, where many of my constituents work. When it was announced that the work was going out to tender with a view to outsourcing, people were concerned that the jobs would not remain in the UK. Does my hon. Friend agree that that is one of the main worries of the people who work there and that they should addressed?

Gordon Banks: My hon. Friend is right that people are concerned about whether the jobs remain not just on the individual sites that we are discussing tonight, but in the UK. I hope that the Minister will deal with my hon. Friend's point when he replies to the debate.
	I have had the opportunity to visit the Almondbank site on several occasions and I will be there again tomorrow when Baroness Taylor, who has accepted my invitation, visits the site before reaching a decision on it. Almondbank is always busy and during my visits I am always impressed with the enthusiasm and professionalism of the work force and the way in which they go about their business, pulling together to meet tight deadlines. I believe that the House owes a great deal of gratitude to the work force, as they ensure that our brave soldiers are supported with a well maintained helicopter fleet. I have no doubt that I will witness more of the same hard work and commitment tomorrow, and I am glad that Baroness Taylor will be there to see it too.

John Spellar: It is not just hard work and the skilled quality of work that are on display at Almondbank, but a dramatic improvement in productivity. That has been achieved through the co-operation of the work force, setting an example not only to the rest of government, but to the rest of British industry.

Gordon Banks: My right hon. Friend makes a telling point. As I said earlier, the work force at DARA have met and exceeded every expectation placed on them by the MOD. That should be a positive factor to bear in mind when the decision about its future is taken. I would like to take this opportunity to thank Baroness Taylor for giving up her time to visit Almondbank and I trust that my right hon. Friend the Minister will make her aware of that. I have always felt that it is vital for Ministers to meet local management and workers on site before taking any such important decisions.
	No one is pretending that this is an easy situation and we all realise that tough decisions are necessary, which is what being in government is all about. The introduction of market forces to the public sector has forced Government agencies to reconsider the way they operate and it has been no different for DARA. Obviously, the Government have a duty to ensure that defence budgets are spent wisely and the fact that the MOD decided to "test the market" to determine whether DARA and its work force would be better suited outside the Ministry of Defence is indeed the reason why we are here tonight.
	It is only right at this point to pay tribute to the trade union officials of Unite, PCS and Prospect who have come together under a single banner, led by Ian Waddell, and have put forward very detailed and well informed proposals. The unions have worked with the Government in defence matters in other areas, especially on the Defence Support Group. There is confusion as to why DARA cannot fit into that concept.
	Union officials have argued well on behalf of their work force and continue the fine tradition of trade unionism in Scotland. The workers can feel rightly proud of how their union officials have fought their corner. The unions will agree that their proposals came late in the day, but they were encouraged to play that role by the previous Minister, Lord Drayson. The important point, however, is that the proposals have now been made and are on the table. I am grateful that Baroness Taylor has delayed the decision on DARA's future, and I hope that the time is being well used to explore all the options fully. But will my right hon. Friend the Minister tell the House what the Government's time scales are in relation to the decision-making process?
	When the Vector Aerospace proposals were made, sale was the only game in town. It represented the best, and at that time, only option for securing the future of the work force. Ministry of Defence officials saw it as the only alternative to long-term decline and inevitable job losses.

Sarah McCarthy-Fry: At Fleetlands, the workers saw the engine maintenance business disappear, which left only helicopter repair. I take on board my hon. Friend's point. Should we not ask the Minister to delay as long as possible to ensure that the workers are fully consulted and feel fully a part of the decision? Does he agree that the workers support and enable our armed forces to do the job that they do so well around the world?

Gordon Banks: I could not agree more strongly with my hon. Friend's point. That issue has been raised in discussions with unions and the work force. Were the Government in a position, at some point in the not-too-distant future, to establish a working group to consider the future of the plants outwith a private sector sale, I am sure that Members, unions and the work force would embrace the MOD's proposals.
	I met Vector Aerospace's chief executive officer, Donald Jackson, twice last year, once in Canada and once in London. Our talks were civil and Mr. Jackson recognised the skills of the work force. He outlined to me that were his company successful, the Almondbank work force would have a major part to play in the future of Vector Aerospace. Those assurances were welcome and remain so. Concerns about the company have been flagged up, however, particularly relating to its size and the permanence and stability of its future plans. I assume that as Vector Aerospace has been selected as the preferred bidder, the Government are satisfied with its ability to take DARA and its work force forward. But will the Minister outline how and why Vector has the capability to move DARA forward whereas the public sector does not?
	I anticipate that my right hon. Friend will tell me that the Chinook, Sea King and Lynx platforms have a limited life span, and that future rotary wing maintenance requirements will become the responsibility of the manufacturer, due to a change in the purchasing policy at the MOD. But the very fact that the responsibility lies with the manufacturer, whose sole objective is to produce new helicopters, means that it will be forced to subcontract much if not all of that maintenance work. It is my understanding that Vector Aerospace would aim to secure such contracts for Almondbank. The question must be: why cannot DARA secure that work in the public sector? If Vector has investment plans that will facilitate that development, they have not been made clear to the trade unions in the ongoing negotiations. If the Minister is aware of Vector's investment plans, will he tell the House a little about them tonight?
	Colleagues might think me psychic, but I am also sure that when the Minister replies he will say that privatisation will give DARA more of an opportunity to secure commercial work, thus giving the company a greater degree of stability. But DARA already has a private sector order book. Again, we must ask why the existing commercial order book cannot be "grown" while remaining in the public sector. I hope that the Minister will be able to address that.
	Let me give some of the details of the trade union proposals. The unions want a system of mobile servicing parties to be introduced. The parties would be based at our main operating bases, and would provide service support for aircraft and components. The proposed arrangements would reduce downtime, and as a result would increase the availability of aircraft. The unions believe that that approach has a proven track record at ABRO, where in-barracks support arrangements currently apply to the ground vehicle fleet. However, it is important to remember that if ownership leaves the MOD, with the loss of ownership will go a loss of influence and control. The new owners of the operation will make the decisions.
	A further benefit of the union's proposals is that inexperienced servicemen can work alongside experienced and seasoned craft personnel, and learn on the job as they are coached. The unions see no reason why that "man in a van" approach, which is successful elsewhere, could not be equally successful at DARA. They also propose the establishment of a dedicated DARA liaison representative at each main operating base to act as a contact point for the squadrons and to co-ordinate mobile servicing parties, ensuring that all expectations and demands are met. They suggest that service personnel should be reintegrated at centres of excellence, in this case Almondbank and Fleetlands. That in itself would build stronger relationships between DARA and its main customer, and would make possible a knowledge transfer that could be taken to the front line.
	I suppose that it would not be possible to have a debate of this type without mentioning the security of service to our armed forces, especially when the United Kingdom helicopter fleet is playing such a vital role in supplying our troops. I hope the Minister accepts that it is not inappropriate to ask whether the time is right for such a move. With a fleet of over 300 helicopters serving in operations all over the world and given the commitment made in 2005 to invest £3 billion in the helicopter fleet over 10 years, it is not unreasonable to ask if that could be better achieved within the MOD. Nothing in my mind or in my words suggests that MOD Ministers will not consider fully the effect on the armed forces and make a decision that is in their best interests—I know that they will—but I suggest to my right hon. Friend the Minister that it is legitimate to ask whether this is the right time.
	No one is claiming that the union's proposals are perfect, or indeed that Vector's proposals are all bad. However, it has taken the MOD years to reach preferred-bidder status with Vector Aerospace, and as the union's proposals have only been with the MOD for a matter of weeks, it is questionable whether there has been enough time for them to be fully evaluated. Will the Minister undertake to make representations to his colleagues to ensure that trade union proposals focusing on retaining the skills based at Almondbank in the public sector will be given all due consideration? If the Department experiences difficulties, I ask for them to be discussed constructively with the unions in a way that gives them an opportunity to address the points that are made.
	Each day that passes without a decision adds to the uncertainty of the work force, and increases the likelihood that staff will look elsewhere. We are talking about vital skills, not jobs that we can get off the shelf. If we lose those skills, DARA will lose its effectiveness, and also its attractiveness to both the public and the private sector. Then we will be in serious difficulties.
	South Perthshire is not a highly skilled area, and it certainly would not be possible to replace staff quickly if there is truth in the report that current employees are already looking for other work in case the business is sold. The sale could therefore result in an outflow of highly skilled staff, which would in turn destabilise the business. I ask the Minister to ensure that that too is taken into account in his Department's considerations.
	Certainly in my constituency, DARA is one of the few large-scale employers left, thanks in no small part to the—currently invisible—Conservative party. We are, in some senses, lucky not to be talking about closure, and instead to be discussing in what sector and in what form Almondbank will exist in the future.
	The only point I have yet to make is to re-issue my invitation to the Secretary of State for Defence and Baroness Taylor to visit Almondbank, but in light of yesterday's announcement at Scottish questions I no longer have to do that. However, I do not want to leave out my right hon. Friend the Minister, so I extend an invitation to him to come to Almondbank, and I also assure him that he is always welcome in my constituency. If he wishes to come to Scotland with Baroness Taylor tomorrow, on the birthday of Robert Burns, I am sure that we will make him feel very welcome.
	I hope the Minister can answer the points raised and shed some light on his Department's current thinking on the Defence Aviation Repair Agency. As I have said, the key is to ensure that the unions' proposals are fully considered—and, indeed, responded to. Privatisation is no longer the only option, but I am aware that it remains an option. If there is any way that DARA can be kept within the Ministry of Defence while remaining a viable business, I shall certainly support that. The Minister will also have the support of the work force and the unions; I can assure the House of that.

Pete Wishart: I congratulate the hon. Member for Ochil and South Perthshire (Gordon Banks) on securing this debate, which is important for both our constituencies. Although DARA Almondbank is in his constituency, the vast majority of its work force are my constituents from the city of Perth, and it is located less than two miles across our boundary. I share the concerns of the work force and the joint trade unions about the future of this first-class facility. I have had several meetings with local trade unions, and I have spoken with employees and I have met with the management. There is a genuine, general concern across Perthshire about the fate of DARA Almondbank.
	My colleague, Roseanna Cunningham, the MSP for Perth, had a similar debate in the Scottish Parliament last week, in which she attracted cross-party support for the plight of DARA Almondbank. I also understand that the First Minister of Scotland is due to visit in the next few weeks, and there will, of course, be an important visit tomorrow by Baroness Taylor. I also extend an invitation to the Minister: he should come to Perthshire on Burns' day as he would have a fantastic time—but he is probably too busy.
	All of this interest is because DARA Almondbank is vital to the Perthshire economy. In 2006, it was reckoned that it accounted for about 6.4 per cent. of the total employment in the area, and that the Defence Aviation Repair Agency's presence contributed about £38.4 million to the local economy of Perth and Kinross. Perth and Kinross council has had an ongoing watching brief of DARA Almondbank over the past 10 years, and it has seen the extent of its contribution and how key a resource it is for the area.
	The type of jobs it provides is an important aspect of that. Like much of rural Scotland, Perthshire is overly dependent on tourism. I welcome tourism—it is a great industry for my constituency—but it is notoriously low paid and low skilled. The jobs at DARA Almondbank are high skilled and high value—the kind of jobs we do not see too often in Perthshire. It is essential that we hold on to them, and develop them and the skills associated with them, so that we can take more young people into those high-skilled, high-value jobs.
	Disappointingly, the Ministry of Defence has said that there are only two options for DARA Almondbank: privatisation or a managed decline. That suggests a poverty of imagination. The unions and the work force have refused to accept that they are the only two options, and they have put forward a compelling case for DARA Almondbank to be retained in the public sector. I welcome the fact that we are not debating the possible closure of DARA Almondbank; I respect the fact that the facility is to be saved, but what we as local Members want is the best possible outcome for it. We do not want it just to be retained and to remain; we want it to be developed, and to ensure that it goes from strength to strength and wins more of the awards that it is famous for winning, and to develop its skills. That requires our attention within the public sector. I was quite encouraged yesterday when the Secretary of State for Scotland told me during Scottish questions that he would be open to "all" proposals.
	I still hope, even at this late stage, that the joint trade unions' proposals will secure that fair wind, because their suggestion is truly imaginative. The hon. Member for Ochil and South Perthshire touched on some of the things that they are offering. Among them are: the creation of mobile repair teams to service helicopters at bases or at the front line; a change in funding to contracting for capability; and integrating service personnel into the business.
	The joint trade unions have been to Westminster and have met the Minister to discuss the proposals. I understand that they were not particularly encouraged by what he had to say. Perhaps the intervention by the hon. Member for Ochil and South Perthshire in this debate and the emphasis that has been put on DARA will mean that the Minister will re-examine the proposals and give them a bit more of a fair wind.
	We know that the preferred bidder for DARA Almondbank is Vector Aerospace. I do not share the confidence of the hon. Member for Ochil and South Perthshire in that company. It is a small Canadian outfit, and if it acquired DARA Almondbank, its whole output would be doubled. That is how small Vector Aerospace is. It has no track record in UK defence infrastructure, and I have concerns about its ability to run DARA Almondbank effectively.

Gordon Banks: Lots of figures are bandied about concerning what effect taking over DARA Almondbank would have on the size of Vector Aerospace. The most reliable that I have is that doing so would increase Vector Aerospace as an organisation by a third, and not by 200 per cent.

Pete Wishart: I am grateful for the hon. Gentleman's correction. It still concerns me that Vector Aerospace would almost become dependent on the output of DARA Almondbank. Several questions remain. If this is not successful, what happens to the skilled jobs and to the DARA Almondbank facility? Will the jobs be lost? Will this be the end of an award-winning, first-class facility? We need to be reassured that the jobs will be safe.
	I took some comfort yesterday from Baroness Taylor's comment that she would not permit the ongoing sale to a third party. That gives a measure of reassurance to some of the Almondbank work force, but it would remain cold comfort if the whole operation fails. That question needs to be addressed, given the concern that we have about all this.
	I am grateful for the fact that Baroness Taylor will be visiting DARA Almondbank on Friday. I know that she will enjoy her trip, because she will meet a skilled work force who are totally committed and dedicated. They have provided such an excellent service to front-line defence capabilities and to so many operations in the course of the past 10 years. I only hope that when she speaks to the work force she will listen to their real concerns and to the compelling case to retain DARA in the public sector.

Bob Ainsworth: I congratulate my hon. Friend the Member for Ochil and South Perthshire (Gordon Banks) on securing this debate. He is assiduous in pursuing local issues on behalf of his constituents, and he has rightly been very active in this matter on the future of the Defence Aviation Repair Agency, and in particular Almondbank. He is, of course, joined in his concerns by the trade unions, acting on behalf of DARA's employees, and they, as well as he, have raised issues over time. As he has said, they have put together alternative proposals for consideration at the invitation of Lord Drayson. I have read the trade unions' proposals. Baroness Taylor has gone through the proposals in detail, as has the Secretary of State for Defence. As my hon. Friend knows, we have also talked to him and listened to his advice, ideas and representations.
	We have two guiding principles in examining DARA's future, which override all other considerations. I hope that the House and my hon. Friend will agree that those principles are the priorities that should steer our decisions. First and foremost are the interests of our armed forces, who are involved in difficult and dangerous operations on our behalf and are dependent on the equipment—in this case helicopters—that we supply them with for their effectiveness and safety. We will do nothing that does not protect and potentially enhance our ability to supply our forces effectively now and in the future.
	Our second guiding principle is securing the skills that we have at DARA. Short-term financial considerations are of little or no value. In rotary wing maintenance, as elsewhere, we need a sustainable skill base in the UK that is capable of meeting our needs over the long term as well as providing quality jobs in constituencies such as that of my hon. Friend. Those principles underlie the defence industrial strategy. They are widely supported in the House, and by the trade union movement, too. Indeed, the only people who oppose the principles of the strategy are the free market zealots who believe that the maintenance of industrial capabilities in defence is not important.
	Historically, DARA's role has been to provide depth maintenance, to repair and to overhaul the fixed-wing aircraft of the RAF and the helicopters of all three services. In recent years, logistical reform has led to the migration of depth repair to our partners in industry, including some at the main operating bases. Such changes already happen. Partnering is working particularly well in the maintenance of our fast jet fleets, both Tornado and Harrier. There are 11 more Harrier aircraft available to the front line at any one time, as they spend less time in depth maintenance because of the partnering arrangements that we have managed to agree to cover that work. The time spent in depth maintenance is reduced by 59 per cent., allowing us greater capability on the front line.
	As a result of those developments, DARA has progressively become less viable. Its businesses for fast jets and engines have already closed. Its business in Wales, having lost its fast jet work, now supports only the VC10. DARA's helicopter repair business is based at Fleetlands, Hampshire and the associated helicopter components business is based at Almondbank. The vast majority of its work is to support the Chinook helicopters, as a subcontractor for Boeing, and to support Sea King helicopters, which it currently undertakes directly for the MOD although it will soon be a subcontractor for AgustaWestland.
	Support for new helicopter platforms such as Merlin and Apache is provided by the manufacturer, which provides through-life support because of its inherent knowledge of the platforms' design and military capabilities. As our equipment becomes more complex, that is an inevitable trend. We will need depth maintenance to be provided by the original manufacturer, as it knows the detail of the equipment that it supplies.
	On the basis of its defence work load alone, we cannot see how DARA's rotary wing business can remain viable beyond the out-of-service date of the Sea King helicopter. In sharp contrast to our industrial partners, DARA holds very little intellectual property or design capability. However, as a subcontractor, it possesses technical know-how and, as my hon. Friend said, a highly skilled work force who are extremely capable and committed to supporting operations. We must ensure that that capability endures. That is what we are about.
	So, since late 2005, we have been examining options for the future of these businesses, aiming at a solution that best preserves the capability to support the armed forces and secures the long-term employment of the work force. We looked at both sale and in-house options. It is not true, as some assert, that Vector Aerospace was the only interested bidder: in fact, we received expressions of interest from more than 20 bidders, out of which three companies were selected as provisional preferred bidders.
	As the process continued, however, Vector Aerospace demonstrated that it was best placed to deliver the capability that our armed forces require, and to provide longevity of employment to the work force. Thus, in July 2007, I announced that Vector Aerospace was the preferred bidder for the rotary wing and component businesses.
	My hon. Friend asked about consultation with the trade unions. I can tell him that, throughout the period since 2005, we have been in both formal and informal consultation with them. Yes, they have raised concerns, but it is their job to do so. My hon. Friend was right to say that the unions have produced their own report, but I would not like the House to get the impression that we have not had consultations with them throughout the period. Moreover, Baroness Taylor is prepared to continue to talk to the trade union movement into the future.
	Despite its relatively small presence in the UK, Vector Aerospace has considerable defence experience, especially in north America, where it provides rotary wing maintenance to the US military. Through its UK subsidiary, Sigma, it already services the MOD's VC10 Conway and Hercules engines, and it is seeking to broaden its footprint. There are clear indications that there will be future growth in this area, and Vector Aerospace has already actively made the necessary approaches to secure further MOD engine business for its UK base.
	There is tacit but substantial support from Boeing and AgustaWestland that Vector Aerospace would be a key link in their performance under future contracting arrangements. There are therefore real prospects for investment and for winning future business through commercial and military work.
	In this process, we have insisted that the bidder complies with all employment obligations and with the Government's fair deal for staff pensions. We will not sell the businesses unless Vector Aerospace complies with those vital employment safeguards. Moreover, I can tell my hon. Friend the Member for Portsmouth, North (Sarah McCarthy-Fry) that the protections are identical for both the Fleetlands and Almondbank sites, and that they also apply to any subsequent sale of the business to a third party. Vector Aerospace has also undertaken to support and take forward the apprentice scheme.
	Vector Aerospace has legally undertaken to retain the businesses in the UK. To provide further certainty for the work force, we have secured equally binding assurances that Vector Aerospace will remain at the current locations as long as it is economically viable to do so. The MOD has also secured a legally binding commitment that Vector Aerospace cannot sell or transfer the business to a third party without the MOD's prior approval.
	If the sale proceeds, we expect Vector Aerospace not only to maintain current capability but to innovate and to improve the current service that DARA provides. Vector Aerospace has a good track record, in both employee relations and improving performance. I can also confirm that it has no current plans for redundancies at either site.
	The hon. Member for Perth and North Perthshire (Pete Wishart) has accused the Government of lacking imagination, and he has asked that we think again about the sale. I do not know to what degree he has looked at the developments that have taken place under the defence industrial strategy. I am not at all sure what priority he gives to the issue, because I am not certain what priority his party gives to defence per se, never mind to the industrial hinterland that is required if we are to maintain our defence capabilities.
	All the innovation that the hon. Gentleman talked about, and the methodologies for bringing well-paid employment and high levels of performance to the defence industries, is already taking place through partnering arrangements. There are such arrangements for different aspects of manufacture: for fleet maintenance—my hon. Friend the Member for Portsmouth, North (Sarah McCarthy-Fry) will be more aware of that than anyone else in the Chamber—and for fixed-wing and rotary. If we are to develop, maintain and ensure security for the work force, that has to be the road forward. That is the direction that all contracting is taking. Inevitably, it must go in that direction.
	I know that Members of Parliament have a job to do, and my hon. Friend the Member for Ochil and South Perthshire has been doing that job for some time. However, I hope that they will not deliberately posture and scare people, because in the end it may be not the sale but ongoing uncertainty about the future that drives the work force away from DARA. They need to know that they are appreciated. I think that the main reason why the company is interested is the work force's skills. It is not the real estate that the company wants; it wants that skilled work force, so that it can develop them and take them forward. If my right hon. and hon. Friends in the ministerial team and I did not believe that, we would not be considering the option as a way forward.

Pete Wishart: There is no scaremongering going on at Almondbank. The hon. Member for Ochil and South Perthshire (Gordon Banks) and I have received countless representations from the concerned work force. The Minister speaks glowingly of the private sector's involvement in defence installations, but I remind him that Scotland's experience with privatisations and with the private sector becoming involved in defence facilities has not been particularly positive. One need only look at the Rosyth naval base in Dunfermline to find out what happens when the private sector is involved. The experience is not as positive as the Minister says. It is right that we raise concerns about such privatisations.

Bob Ainsworth: I have visited the base at Faslane, where partnership arrangements have led to improved efficiency and an ongoing future for the work force. I doubt whether the hon. Gentleman supports that base; he is probably more likely to be at the gates demonstrating against its very existence. Only the other week I visited the RAF base at Marham, where we have partnering arrangements. BAE Systems employees work on the base alongside military people and Rolls-Royce employees to deliver supply and efficiency improvements in support of our Tornado fleet. Those methodologies are well-embedded, and are delivering real gains and security of employment for skilled people, not just in Scotland but across the length and breadth of the United Kingdom.

Eric Joyce: Apprenticeships have been mentioned. My hon. Friend the Member for Ochil and South Perthshire (Gordon Banks) and the hon. Member for Perth and North Perthshire (Pete Wishart) are referring to very skilled jobs. It is not the policy of the Scottish Executive or Government, or whatever we call them, to fund apprenticeships in the workplace to the same degree as the UK Government, but is my right hon. Friend the Minister aware that one place where apprenticeships are still funded by the UK Government is in Scotland in jobs such as those that we are discussing?

Bob Ainsworth: Part of our negotiations has been aimed at securing a commitment to continuing the situation as regards the apprentice scheme at DARA. We have got commitments from the company on that. We expect it to take the scheme forward, and to develop the apprentices and the apprenticeship, just as we expect it to maintain and develop the work force.

Gordon Banks: May I take my right hon. Friend back to the point that he made a few moments ago about the skills base at DARA at Almondbank? The expertise there which, as I said in my remarks, has met and exceeded every expectation of the MOD, makes the site attractive to a private sector buyer, and that same expertise has saved that location from closure and the other rationalisation of DARA that has gone on. Some of my constituents, as well as some of the constituents of the hon. Member for Perth and North Perthshire (Pete Wishart), see it as a double-edged sword—the expertise that saved the site from possible closure may now take them out of the MOD family that they have been in for so long.

Bob Ainsworth: My hon. Friend is right to highlight the issue. We all know from experience in our own lives and in our constituencies that change is always worrying. I can only repeat what I said earlier. The two principles that we have in taking the proposal forward are, first, to maintain and improve support to our armed forces. We must never let go of that. It must always be the overriding first principle for anyone who is interested in the defence of the realm. The second is to make sure that we maintain the skills base that allows us to do that over the long term. If we did not believe that that was possible in this case, we would not be considering the proposal.
	If the sale proceeds, we will expect Vector Aerospace not only to maintain current capability, but to innovate and improve the current service that DARA provides. Vector Aerospace has a good record both in employee relations and in improving performance. I can confirm that it has no current plans for redundancies at either site.
	As I indicated to my hon. Friend, we have looked seriously at the alternative trade union proposals. We do not dismiss the work that they have done. The document is an impressive piece of work. I have read it, and my hon. Friend the Under-Secretary has gone through it in great detail. However, we remain of the view that under the current arrangement DARA is not viable into the future and not viable on MOD rotary work alone. It needs care and investment, it needs to win other business and it needs to use and exploit the skills that its work force clearly possess.
	The objective of the proposals that we are developing with Vector Aerospace is to generate the best opportunity to secure the business and investment and thereby protect the skill base that is so important to the constituency of my hon. Friend the Member for Ochil and South Perthshire and to our nation's industrial capacity.
	I cannot join my hon. Friend in Scotland tomorrow. I am the duty Minister here in the House. A day in Perthshire might be a lot more pleasant than hanging around waiting for the Whips to tell me what or what not to do. I hope that he will continue discussions about this important matter with Baroness Taylor tomorrow, and I hope that over time we will be able to allay some of his fears and those of the work force at DARA.
	 Question put and agreed to.
	 Adjourned accordingly at twelve minutes to Six o'clock.